People are quitting their jobs at the highest rate since the recession began. Though that may sound like bad news, it’s quite the opposite. In fact, it’s a sign of economic confidence.
Sure, Friday’s jobs report was disappointing. The jobless rate edged down to 8.2% from 8.3%, (lowest in three years). Despite that, the fact that people are quitting their jobs is good news for the rest of us. Over 2 million workers quit their jobs in February, the most since November of 2008, according to the Labor Department. Quitting a job shows confidence. No one quits when the chips are down, you try like hell to hang onto your job because you’re worried you won’t find a new one. To put it in perspective, monthly quits sank to a record 1.6 million in September of 2009, right when things started to turn sour. They were at an average 3 million a month before the downturn. It’s a small sign, but a sign nonetheless, that the job market might be improving.
Another reason that quitting is a good sign is something called “churning“. That refers to the idea that people leave their jobs for higher paying positions elsewhere, or new opportunities that present themselves. They take risks, and by leaving, leave a hole somewhere for someone else to fill. That’s a good thing for the market, so when people hang onto their jobs, those opportunities dry up and the market crawls.
“For workers who are unemployed, if there’s less churning of jobs, it’s harder to get on the merry-go-round,” said one economist. Churning is no small thing. In fact during the recent recession, 80% of the drop in hiring was due to low churning, not lower job creation. But churning is only one half of the equation. Companies have to fill those open positions too. That is happening, but companies are dragging their feet a bit on it. Companies hired 4.4 million workers in February, up 3.4% from January and 7.2% last year, according to the Labor Department.
If companies don’t pick up the pace, the quitting and churning trend in the jobs market won’t last. But if the trend does hold, it could end up being a long-awaited solid-foundation for economic improvement, though not one that can be credited to present Obama honestly. The recovery is, as it should be, in the hands of the American people.