American Wage Gains Seen Spurring Greater Job Mobility
More American employees may voluntarily quit their jobs this year as an increase in wages and openings boosts confidence in the labor market.
About 2.2 million U.S. workers resigned in December, a 7.4 percent increase from a year earlier, based on seasonally- adjusted data from the Department of Labor. These employees represent 53 percent of total separations, the highest since June 2008.
This ratio has shown “good improvement and has been trending up” after hitting 37 percent in April 2009, the lowest since the data have been collected, according to Nicholas Colas, chief market strategist at ConvergEx Group, an institutional equity-trading broker in New York. Readings above 50 percent imply “a reasonably good and improving economy.”
Workers are more likely to leave their jobs when they’re feeling optimistic about better opportunities, so the quits ratio is “inextricably linked” with consumer confidence, Colas said. A rise to about 60 percent -- seen in 2005 and 2006 -- would suggest “we’re really chugging along,” he said.
The share of Americans who say business conditions are “good” minus the share who say they are “bad” fell to minus 10.7 percentage points in January from minus 9.1 points the prior month, which was strongest level in more than four years, based on data from the Conference Board, a New York research group.
Even with the deterioration, this measure of confidence has risen 14.7 percentage points from January 2012.
“It seems clear that consumers anchor their judgment on business conditions to what they see in labor markets,” Colas said.
“Job creation is one of the primary factors that motivates people to quit their job,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh. The backdrop of improved confidence, three years of net hiring and a decline in the unemployment rate -- from as high as 10 percent in October 2009 to last month’s 7.9 percent -- give “consumers the sense that it’s a better time to look at these other opportunities.”
Employers added 157,000 workers to payrolls in January, following a revised 196,000 advance in December, based on data from the Labor Department. This compares with average monthly gains of almost 181,000 employees last year, the highest since 2005. U.S. businesses eliminated about 415,000 positions a month during the 18-month recession.
“If jobs are out there and especially at a higher wage, that trumps any bad feeling consumers may have about the economy,” said Robert Dye, chief economist at Comerica Inc. in Dallas. While hourly wages “still have some room to go” to return to pre-recession levels, recent improvements may encourage frustrated workers to “go out and get a better job.”
While the U.S. government hasn’t changed the federal minimum wage, currently $7.25 an hour, since 2009, average hourly earnings for all U.S. private-sector employees rose 2.1 percent in January to a seasonally-adjusted $23.78 an hour from a year ago, according to the Labor Department.
The housing market’s recovery also could stimulate some movement among U.S. employees, Dye said. “As houses become more sellable, that allows workers to relocate to new jobs.”
Even so, Americans are more cautious, given their experiences during the recession that ended in June 2009, so they’re “much more reluctant to quit a job unless they have another one lined up,” Faucher said. In addition, hiring gains still are somewhat modest, driven primarily by a decrease in layoffs rather than “a cyclical pick-up” that would indicate a stronger labor market, he said.
Employees also are more discerning about differentiating between “any type of job and a full-time position, ideally with benefits,” said Colas, who analyzes trends related to Google Inc.’s search results. There’s been a clear change in psychology as consumers seek more stability, based on Internet search data for prospective employees, he said.
The “quality, type and pay of jobs” is very important to workers now, whereas they may have been willing to take part- time employment during the height of the recession to make ends meet, Colas said. As a result, search volume for full-time work has increased about 400 percent compared with 2006, while queries for temp positions are near a five-year low, he said.
During the last economic expansion, the number of people who resigned began to rise in mid-2003 before peaking at about 3.1 million in November 2006, Labor Department figures show. Quits fell to 1.6 million in September 2009 and have shown “slow improvement” since, said Dye, adding that the total will “elevate as the economy continues to improve.”
These data are “absolutely valuable” for gauging dynamics within the U.S. workforce, according to Faucher, who said more voluntary resignations will be a good sign.
“A labor market that has a lot of churn in it, where quits are strong, indicates that people are seeing opportunities out there and taking them,” he said.
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