Frustrated employees are voluntarily quitting their jobs at the highest level in almost three years as confidence they will find another stabilizes, even with unemployment at about 9 percent for more than two years.
Almost 2 million Americans quit their jobs in May, a 35 percent rise from the lowest level in January 2010, according to the Department of Labor. An increase in employees switching jobs is a signal of increased confidence in the labor market and the overall economy, according to Scott Brown, chief economist at Raymond James & Associates Inc., a brokerage firm in St. Petersburg, Florida.
“When the economy is rebounding, workers are more likely to quit their jobs to take another,” Brown said, commenting after last week’s report that the U.S. economy grew less than forecast in the second quarter.
The share of Americans who perceive that jobs are “hard to get” subtracted from the share of those who say opportunities are “plentiful” rose to negative 39 percentage points in July from a low of minus 46 points in November 2009, according to data from the Conference Board, a New York research group.
The 2007-2009 recession and labor market weakness contributed to rising worker frustration, according to a survey conducted by Right Management, the consulting division of staffing agency ManpowerGroup. Eighty-four percent of employees planned to look for a new job in 2011, up from 60 percent the prior year. Only 5 percent intended to remain in their current position, according to Right Management’s December survey.
Coming out of a recession, workers’ pent-up frustration about their jobs tends to grow, Brown said. As employees’ perceptions of the labor market recovers, voluntary departures are likely to rise further, assuming the economy continues its modest expansion.
A further increase in employees who leave, as well as consumers’ confidence in the labor market “still have a long way to go to reach pre-recession levels,” Brown said. “This is a very gradual recovery.”
Gross domestic product climbed at a 1.3 percent annual rate in the second quarter, after almost stalling at the start of the year with a 0.4 percent gain in the prior quarter, according to data released last week by the Commerce Department.
President Barack Obama expects the U.S. economy to keep growing despite a slowing trend reflected by weak GDP numbers, White House spokesman Jay Carney said on July 29.
Energy and Food
The recent weaker-than-forecast economic data appears to have been the result of several “temporary” factors, including higher energy and food prices, Federal Reserve Chairman Ben S. Bernanke said July 13 in his semi-annual testimony to Congress.
“The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending,” Bernanke said.
Pent-up demand by job-weary workers is benefiting Manpower’s permanent placement business, even as companies remain “pretty hesitant” about new hiring, Chief Executive Officer Jeffrey Joerres said a July 21 conference call.
Employee “churn” -- or job switching -- is driving some of the permanent placement volume for staffing agencies such as Robert Half International Inc., according to Kelly Flynn, a Boston-based analyst for Credit Suisse Group. New job creation is the other primary source of revenue growth in permanent placement for these companies, she said.
“While new hiring is looking pretty sluggish, these companies seem to be benefitting from more churn in the workplace,” Flynn said.
This may be helping their stocks outperform the broader market. The Standard & Poor’s Supercomposite Human Resources & Employment Services Index, which includes Manpower and Robert Half, has risen 3.3 percent since July 18, compared with a 1.4 percent decline for the S&P 500 Index.
Flynn maintains “outperform” ratings on Manpower and Robert Half because the valuations of both companies indicate “that investors are pricing these stocks for a double-dip recession, not a pause in hiring,” she said.
Permanent placement revenue grew 44 percent to $80.7 million in the quarter ended June 30 for Menlo Park, California-based Robert Half, the company said July 20. It was the most since the third quarter of 2008.
“We’re certainly seeing a fair amount of turnover in our clients that’s also creating demand,” as employers have to replace people who have left, Chief Financial Officer Keith Waddell said on a July 20 conference call.
At the same time, unemployment rose for a third straight month to 9.2 percent in June, while employers added only 18,000 workers to payrolls, the fewest in nine months, according to the Labor Department. Because eligibility for regular unemployment benefits is determined largely by states, in general workers must become unemployed through no fault of their own in order to get benefits, according to the Department of Labor.
Still, the full-time recruitment market remains “very hot,” said Jeff Schwartz, a principal at Deloitte Consulting LLP in New York, after last week’s GDP figures.
Two years after the end of the recession, 65 percent of employees have “pent-up desires to leave their current employers” and are testing the job market, according to an April survey conducted by Deloitte.
This is a “significant” increase from September 2009 when 55 percent of workers had similar intentions, Schwartz said.
“More people are acting on turnover intentions now,” Schwartz said. “This manifests itself as a benefit to staffing and recruitment agencies.”
Similarly, about one in three workers are “seriously considering leaving” their current job, according to a June survey by Mercer LLC, a human resources consulting unit of Marsh & McLennan Cos. Over the past 15 to 20 years, this has averaged about one-in-five workers, so the most recent increase is “very startling,” according to Pete Foley, a principal at Mercer in New York.
“It means there’s a lot of pent-up frustration, because people are saying that, even in the face of 9.2 percent unemployment when prospects aren’t all that rosy,” Foley said. “There’s a perception that the employee-employer deal is kind-of broken.”
The willingness of workers to change jobs so readily given the weak labor market and the resulting benefit to the permanent placement sector are surprising, said Flynn of Credit Suisse.
“Historically, permanent recruiting has lagged the temporary market, but in this recovery permanent placement came snapping back really quickly,” Flynn said. “It’s recovered faster than expected and stayed robust longer than expected.”
Worker frustration alone may not account for all of the increase in permanent staffing revenue, Flynn said. Some companies may be upgrading their workforces and making strategic hires that will drive revenue, while still eliminating other positions, she said.
As more employees switch jobs, this will embolden some of their coworkers to do the same, according to Brown.
“If the economy rebounds from its recent slowdown as Bernanke expects, we’ll see more openings for better jobs and that will add to confidence,” Brown said.