MainStreet Macro: The Big Quit is over. Here comes the Big Stay

Last year, workers resigned from more than 50 million jobs. It was the highest number of quits since the government started keeping track in 2000. The great resignation, as it came to be known, was fueled by abundant job opportunities, labor shortages, and big pay increases for workers who quit one job to take another.

A year later, all three of these dynamics are abating, and the great resignation itself is looking like a thing of the past.

Job opportunities

U.S. job openings were down 20 percent in March from a year ago, when they peaked at more than 12 million postings.

Still, the 9.6 million openings posted this past March were well above the level of employer demand we saw in the months leading into the pandemic. Companies are still hiring, and in a big way.

Last week’s National Employment Report from ADP showed 296,000 net new private-sector jobs in April, driven by service-sector employers. Bureau of Labor Statistics data for the same month showed 253,000 new public and private jobs.

Both reports also recorded a strong rebound in hiring from March. More people entered the labor force that month, which helped boost hiring in April.

While the growing supply of workers was greeted with still-solid demand from employers, the year-long downward trend in opportunity is likely to continue as the economy normalizes. 

Labor shortages

At the same time, fewer people are quitting their jobs so far in 2023. In the first three months of the year, quits fell 5 percent from the prior period, and more than double that from the same period a year ago.

And the number of people returning to the job market has increased. Labor-force participation for workers aged 25 to 54 are up slightly from where it was before the pandemic. 

The participation rate fell to less than 80 percent in April 2020, during the depths of the pandemic, and just crossed the threshold back to even in February. It edged up again to 83.3 percent this April, the highest rate in 25 years.

Participation for workers 55 and older and 25 and younger (a significant and underappreciated segment of the labor market) remains below pandemic levels but has been edging up.

Pay increases

With more job opportunities comes better pay. The year-over-year pay increases workers gained from switching jobs peaked in June 2022 at 16.4 percent, ADP Pay Insights data shows.

Since then, pay gains for job switchers have decelerated. This year, April pay gains for workers who switched jobs was 13.2 percent, the lowest pace of growth since November 2021.

Gains were slowest in leisure and hospitality, an industry which was used to high turnover even before the pandemic but suffered even more churn after it.

My Take

All the data points to a slowdown in worker turnover as the job and labor markets slow-walk their way back to something approaching pre-pandemic trends. The Big Quit of 2022 could be easing into the Big Stay of 2023.

This post has been updated to clarify the change in the quits rate.