Skip to main content

The FRED® Blog

Quits are recovering


The dynamism of the U.S. labor market was threatened by the Great Recession. Clearly, the unemployment rate rose and stayed elevated. But flows from one job to another fell, with lower rates of hiring for both the unemployed and the already employed. Like the slow-to-recover unemployment rate, job flows also took a while to bounce back. However, not all job flows are the same. “Quits” are a very good sign for the economy. In principle, a worker quits a job only if she has a better offer elsewhere or has a strong belief she can find another job relatively easily. Also, the threat of quitting puts upward pressure on the wages of the currently employed because firms have to compete to keep the best workers. Even if a worker is replaceable, employers may offer a higher wage to avoid the costs of refilling an empty position.

The graph shows how long quits (as a share of total separations) have remained low. However, they seem to have just now recovered to their pre-recession levels, in line with many other labor market indicators such as wages. On the other hand, “layoffs and discharges” are generally ill signals for the economy. The Great Recession strongly affected layoffs and discharges, but their rise dates to 2006—no doubt, in part, because the housing market began declining before the rest of the economy. Layoffs and discharges aren’t quite back to their nadir, but they have dropped below their level at the start of the recession. For workers, this is good news: Often, those who are laid off take a wage cut on reemployment; but on average, those who quit gain a higher wage with the new job.

How this graph was created: For the blue line, search for “JOLTS” + “quits” and add “Quits: Total Private” (monthly, seasonally adjusted, level in thousands) to the graph. Modify this first series by using “Add Data Series” / “Modify existing series” / “Data series 1”  to add “Total Separations: Total Private” (monthly, seasonally adjusted, level in thousands). Then use the “Create your own data transformation” using the formula a/b. For the red line, do the same but search for and add “Layoffs and Discharges: Total Private” (monthly, seasonally adjusted, level in thousands) series. Modify this series (series 2) by again adding “Total Separations: Total Private” and using the transformation a/b. Convert the frequency for both to “Quarterly” to smooth some of the monthly wiggles.

Suggested by David Wiczer.

View on FRED, series used in this post: JTS1000LDL, JTS1000QUL, JTS1000TSL


Subscribe to the FRED newsletter


Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top