By Ben Winck*
American workers have given up on quitting. Amid last month’s financial results from Wall Street was a warning from some firms that staff has not exited at the rate employers expected.
The U.S. economy has weathered inflation without widespread layoffs so far, but a Great Un-resignation could make seemingly healthy job numbers harder to read.
Just over a year ago, the financial services industry was one of several facing a labor crunch. Job openings in the industry hit a record 499,000 in June 2022, according to the Bureau of Labor Statistics, as firms’ strong demand for workers clashed with a nationwide labor shortage. That hiring spree has since cooled.
But a big input in firms’ hiring plans is “attrition” – the number of workers expected to quit. That creates the problem of headcount costs remaining too high, at least for a while.
Companies generally don’t hope their staff will walk. But when interest rates are going up and workers demand higher pay, attrition feels like a painless way to bring down wage bills. That’s not so easy anymore, since the so-called quit rate – the percentage of the workforce leaving their employer – has sunk back to its low levels from before the pandemic.
One response is for companies to hire less. If that doesn’t work, layoffs do. The rate of those is edging higher. Companies have an incentive to defer the moment of wielding the ax though, for fear of seeming more troubled than their rivals.
The reassuringly low unemployment of the past 12 months, then, needs to be viewed carefully. It might be a sign that rising rates haven’t hurt the economy. But it might also reflect employees staying put until they’re given a shove. The Great Resignation of recent years was an example of how people can behave in surprising ways, temporarily distorting economic predictions.
*The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
