The Big Idea

Quitting to get ahead

Stephen Stanley | April 29, 2022

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.

American workers are quitting their jobs at record rates. However, they are not dropping out of the work force. Most quitters are leaving one job to take a better-paying or more accommodating one. This job-switching is one of the primary drivers of the steep acceleration in wages reported over the last year. It’s one more sign of a tight labor market.

Quitters

The JOLTS dataset published by the Bureau of Labor Statistics includes figures for the number of people quitting their jobs each month as well as the quits rate. The numbers in recent months reached the highest level since the series began in 2000 (Exhibit 1). The quits rate over the past year has been noticeably higher than at any time in this century.

Exhibit 1: JOLTS quit rate

Source: BLS.

Atlanta Fed wage tracker

The Atlanta Fed publishes wage data that offer unique perspectives on how job switching is affecting wages. Researchers at the Atlanta Fed have created a wage tracker using data from the BLS Household Survey. Respondents in that survey rotate in and out of the survey every four months. A portion of them consequently offer wage and salary earnings information spaced 12 months apart that allow for a direct apples-to-apples comparison of a particular household’s wage changes. In contrast, the traditional average hourly earnings figures derived from the BLS Establishment Survey simply measure the average for everyone that held a job in the month and consequently cover a slightly different universe of workers each month. In any case, the Atlanta Fed researchers calculate a median 12-month pay increase each month using responses 12 months apart for the same households. Then, to smooth the series, a 3-month moving average is calculated and reported as the headline indicator (Exhibit 2).

Exhibit 2: Atlanta Fed wage tracker

Sources: Current Population Survey, Bureau of Labor Statistics and author’s calculations

As the chart clearly shows, wage gains year-over-year have accelerated rapidly since the middle of last year, moving from 3.0% as late as last May to 6.0% in March, the highest since the series began in 1997. There has been some speculation that average hourly earnings are beginning to show moderation, as 3- and 6-month annualized increases peaked late last year and have come off to still elevated but somewhat slower advances. However, the Atlanta Fed data suggest upward momentum is continuing unabated.

Job switching

It has historically been the case that workers see their largest pay increases when they switch jobs. That has proven especially true in the current tight labor markets as employers have been particularly aggressive, in their desperation to add staff, to bid up wages and entice people to leave their current job for a better paying one. The Atlanta Fed breaks down its wage earners into those who have remained in the same job over the 12-month period and those who have switched jobs. Not surprisingly, those who have switched are posting substantially higher year-over-year wage gains (Exhibit 3).

Exhibit 3: Atlanta Fed wage tracker: job stayers versus job switchers

Sources: Current Population Survey, Bureau of Labor Statistics and author’s calculations

Those who have switched over the past year posted a 7.1% wage increase, while job stayers “only” managed a 5.3% rise. Both of those readings were also record highs for the 25-year history of the Atlanta Fed database.

ZipRecruiter survey

The Wall Street Journal commissioned ZipRecruiter to conduct a survey of workers directly related to this phenomenon and published a front-page article examining the results last Monday. The survey was taken from just over 2,000 US residents who had started a new job within the past six months. The findings corroborated the high JOLTS quit rate and suggested that it could continue. Among workers ages 25 to 54, about 20% anticipate leaving their job within a year and another 26% expect to stay one to two years. In contrast, the average job has historically lasted four years.

ZipRecruiter found that 64% of job-switchers said that their new job pays more than their previous job. Most of the other 36% may have switched jobs to get more flexible hours, the ability to work remotely, or some other nonwage perk. Of that group, almost half reported receiving a raise of 11% or more, and nearly 9% achieved raises of at least 50%.

The survey also quantified the stiff competition for workers. Of the recent hires in the survey, 37% said that they had been recruited by their new employer—the employer, not the worker, initiated contact—and 22% reported receiving a signing bonus. A separate monthly ZipRecruiter survey found that 54% of employed job seekers expected their current employer to counter with a raise offer if they resign, up from 43% in January.

Still red-hot

All indications are that the labor market remains red-hot, with firms’ demand for workers far outstripping the available supply. The inevitable fallout is that wages are being bid up. The workers who are seeing the largest raises, as usual, are the ones that are willing to switch jobs. Elevated quit rates reflect the extraordinary gains that workers can reap by switching jobs. Firms have been complaining this year about their inability to retain workers, and these figures help to explain why.

Stephen Stanley
stephen.stanley@santander.us
1 (203) 428-2556

This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.

This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.

Important Disclaimers

Copyright © 2024 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.

In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.

The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.

This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.

In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.

Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.