US quit rate hits new high in August

Summary: US quit rate hits series high of 2.9% in August JOLTS report; “reflective of ease which workers switching jobs”; quits, separations up, job openings down.

The number of US employees who quit their jobs as a percentage of total employment increased slowly but steadily after the GFC. It peaked in March 2019 and then tracked sideways until virus containment measures were introduced in March 2020. The quit rate then plummeted as alternative employment opportunities rapidly dried up but proceeded to recover back to its pre-pandemic rate in the third quarter of 2020.

Figures released as part of the most recent Job Openings and Labor Turnover Survey (JOLTS) report show the quit rate hit a new series high in August. 2.9% of the non-farm workforce left their jobs voluntarily, up from July’s 2.7%. There were 242,000 more quits during the month, offsetting an additional 366,000 people employed in the non-farm sector in percentage terms.

Ray Attrill, NAB’s Head of FX Strategy within its FICC division, said the current quit rate is “reflective of the ease which workers are switching jobs, in part at least for better pay or conditions elsewhere.”

Shorter-term US Treasury bond yields rose while longer-term yields fell on the day. By the close of business, the 2-year Treasury yield had gained 3bps to 0.34%, the 10-year yield had shed 4bps to 1.57% and the 30-year yield finished 8bps lower at 2.08%.

The rise in total quits was led by 157,000 more resignations in the “Accommodation and food services” sectors while the “Real estate and rental and leasing” sector experienced the single largest decline, falling by 23,000. Overall, the total number of quits for the month rose from July’s revised figure of 4.028 million to 4.270 million.

In contrast, total vacancies at the end of August decreased by 659,000, or 5.9%, from July’s revised figure of 11.098 million to 10.439 million. The drop was driven by a 240,000 fall in the “State and local government” sector, a 224,000 fall in the “Health care and social assistance” sector and a 178,000 fall in the “Accommodation and food services” sector. Overall, 12 out of 18 sectors experienced fewer job openings than in the previous month.

Total separations increased by 211,000, or 3.6%, from July’s revised figure of 5.792 million to 6.003 million. The rise was led by the “Accommodation and food services” sector, where there were 203,000 more separations than in July. Separations increased in 11 out of 18 sectors.

The “quit” rate time series produced by the JOLTS report is a leading indicator of US hourly pay. As wages account for around 55% of a product’s or service’s price in the US, wage inflation and overall inflation rates tend to be closely related. Former Federal Reserve chief and current Treasury Secretary Janet Yellen was known to pay close attention to it.

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