The rate of people quitting their jobs has fallen to pre-pandemic levels, the latest sign that workers are losing the advantage they’ve held in the labor market for the last two years.
- The rate of quitting fell back to its pre-pandemic level in July, marking the end of the trend known as The Great Resignation.
- Employees have been losing leverage in the job market as the Federal Reserve's interest rate hikes have weighed down the economy.
- Worsening job prospects have pushed down consumer confidence, according to a new survey.
- Mass layoffs have been avoided so far, fueling hopes that the economy could have a "soft landing" from recent high inflation.
The phenomenon known as The Great Resignation came to an end in July, when the rate of workers who walked away from their jobs fell to 2.3%, the same as in February 2020, according to data from the Bureau of Labor Statistics Tuesday. The rate had risen as high as 3% in April 2022, as businesses, facing labor shortages, competed for talent and drove wages up, giving employees more options to quit for greener pastures.
“Workers are feeling somewhat less confident about switching to more lucrative employment elsewhere,” Sarah House and Michael Pugliese, economists at Wells Fargo Securities, wrote in a commentary. “The quit rate has come steadily down in a sign that employers' voracious demand for new workers is abating.”
The fading rate of quitting adds to recent evidence that the high-flying labor market is being dragged back to earth by the Federal Reserve’s campaign of anti-inflation interest rate hikes. The Fed, fearing that wage increases will stoke inflation, has put upward pressure on borrowing costs for all kinds of loans by businesses and individuals. That has made it harder for companies to hire and expand, as well as reducing demand for goods and services.
While declining job openings make the job market bleaker for workers, it’s far from the worst-case scenario. Many economists had predicted that the high inflation of the past two years couldn’t come down without a recession and a harsh spike in unemployment. So far at least, businesses have avoided firing workers en masse, with the layoff rate remaining at 1%—close to a record low—for a fourth month.
Still, the report was full of signs that the labor market is cooling. The number of job openings fell to 8.8 million from 9.1 million in June. That meant there were 1.5 job openings for every unemployed worker in July, down from the peak of two jobs-per-worker in March 2022, and the fewest since September 2022. However, that’s still higher than the 1.2 jobs per worker that were open before the pandemic.
Workers Sense the Shift
The public has noticed this shift in the labor market, according to the Conference Board’s consumer confidence survey released Tuesday. It showed a deteriorating view of job market conditions in August. About two-fifths (40.3%) of consumers in the survey said jobs were “plentiful,” down from 43.7% in July, and 14.1% said jobs were “hard to get,” up from 11.3% in July.
Withering job prospects contributed to the overall consumer confidence index falling 7.5%, a surprise to forecasters who had expected it to increase slightly, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.
The cooling labor market could encourage Fed officials, indicating the economy is on a path to a recession-free “soft landing” from recent high inflation. It may push officials to hold off on further rate hikes, economists said.
The 12-month inflation rate has fallen to 3.2% as of July from its 9.1% rate in June 2022, according to the Consumer Price Index, approaching the Fed’s 2% goal—while unemployment has stayed near record lows.
“There is plenty here to make the case that not only is the labor market rebalancing but at this point it is doing so without pushing up unemployment, which is the Fed’s dream scenario,” John Ryding and Conrad DeQuadros, economists at Brean Capital Markets, wrote in a commentary.