Millions of Americans are leaving their jobs in recent months. The figures of voluntary ‘resignations’ are reaching maximums since there are records, despite the covid crisis, they are still giving some blows (Delta variant) . This is a unique trend when compared to what happened in other recessions: after the crises of 2001 and 2007, resignations and resignations remained at very low levels, preciously, due to the instability of the labor market and the difficulty in finding a better job. This time, at least in the US, it seems that the situation is totally different and has an explanation.
The latest data published showed that 3,977 million workers left their jobs in the US, a record in absolute terms that reflects a large turnover in the labor market. In relative terms (compared to the total number of employed persons), resignations reached 2.7%, one tenth below the previous figure (June), which holds the record for the series. This difference between relative and absolute terms occurs because the number of employed persons in the US increased from one month to the next.
Looking back, in the two previous crises, the number of resignations was much lower than the current one. After the recession of 2007 , the 3 million monthly resignations were not reached until 2016, when the crisis could already be seen well from afar in the rearview mirror. After 2001 it took five years for resignations to reach 3 million as well. Normally, when confidence in the economy and in the labor market is highest is when there is a greater job rotation. Leaving work in the middle of a crisis or shortly after can be a very risky decision.
Why does this phenomenon occur?
Why is it happening now? At first glance, something like this should not be happening in a labor market that has not yet reached pre-COVID employment levels. The key lies, to a large extent, in the sharp decline in the population that is willing to work under current conditions. This has greatly reduced the supply of workers for companies, generating a kind of labor shortage that is benefiting the active population (willing to work).
The above phenomenon may be the consequence of direct public aid ( juicy checks , expanded unemployment benefits …) that have increased the income of American households during the covid and altered their preferences. Now, citizens choose to a greater extent to redirect their careers or for other options (studying, taking care of children …) other than work.
Tom Barkin, governor of the Richmond Fed, explained last week that “the history of the labor market this summer has been the struggle of employers to find workers. Job offers are at a record level. And although there are currently 5.6 million fewer people employed than before the pandemic, there do not appear to be enough job seekers to fill the available vacancies . Labor force participation has decreased and reserve wages have risen. ” The reservation salary is the minimum salary for which a person would be willing to work.
Barkin says that although it may not seem like it, “finding workers is not the only great challenge for companies. In what has been called ‘The Great Resignation’ , employers are also fighting to retain workers. So far, these hiring and retention issues appear to be more concentrated in lower-paying jobs. Recent increases in wage growth among the lowest-paid and the least-skilled workers outweigh those of other workers, reflecting the challenges of companies in hiring and retaining these employees. ”
Workers don’t want to miss out on their first chance at a notable pay rise for the first time in years. The growth in salaries that the hospitality or leisure sectors are experiencing exceeds 10% per year. Salaries in this branch of the service sector have been stagnant for years due to several factors in which globalization could stand out .
Now that migratory flows are practically frozen, as is the globalization process, and domestic demand has suddenly recovered, companies in these sectors urgently need workers. The outcome is a struggle between companies to hire and to have. Millions of Americans are changing jobs in exchange for better conditions.
Vacancies are at maximum
From ING they explain that “with job offers reaching historical records , the job creation figures that disappointed in August are mainly due to the lack of workers, rather than a weakness in demand. With the resignation rate also at its peak Higher, the expectation is that wages will continue to rise, which adds to inflationary pressures in the medium term. ”
Some signs suggest that resignations and resignations will continue to be an important part of the job market in the coming months. “The resignation rate reflects confidence in the job market … And this confidence can be contagious. As coworkers move to other jobs, workers may become more aware of the opportunities they are missing. As new hires with higher salaries are incorporated , current employees may consider a change to ensure a higher salary, “argues the governor of the Richmond Fed.
It may also be that now departures are taking place that had been postponed during the previous year. Barkin believes that many workers stayed in their jobs for the past year and a half, waiting for the pandemic to end to look for another job. Now that the situation is better, these people could gradually leave their jobs. To this is added the return to the office, which can also lead some people to change jobs due to the refusal to accept the return to work in person for whatever reason.
What are the implications of such a high resignation rate? “For the economy as a whole, it could mean inflationary and productivity pressures . A higher exit rate suggests higher future wage growth. Workers who change jobs tend to charge a wage premium … To maintain margins, companies normally resort to productivity improvements and price increases (inflation), “explains Barkin.
So far, salary pressure seems to be concentrated in the lower salary strata. But Barkin believes that higher turnover also among the highest paid workers, which could generate wage pressures at the highest levels of the scale , cannot be ruled out . This general pressure could turn into higher inflation. Barkin believes that the Fed will need to pay attention to this phenomenon to avoid surprises.