Oftentimes, a sign of economic recovery is when people feel that it is okay to quit their job. And people have been quitting in droves.
The Labor Department on Friday said there were 930,000 “job leavers” in July on top of 942,000 in June. And these numbers actually understate how many people are switching jobs.
A broader government survey of the labor market showed a much higher 3.6 million people voluntarily left their jobs in May.
Most people who are quitting are not leaving the labor market. Many are finding jobs with higher pay while others are switching industries completely.
What is going on? They are taking advantage of a record number of job openings at a time when companies are having a hard time hiring.
Job openings create more bargaining power for the workers left in it. Workers still in the market can negotiate better hours and pay because employers need labor to keep their businesses running.
Wage expectations help tell the story. They grew again in June and finally matched pre-pandemic levels, according to a New York Federal Reserve survey of consumers. Americans expect pay to grow 2.6% a year.
Wage growth usually gives a big boost to the entire economy so long as it’s matched by increases in productivity. When workers earn more, they tend to spend more. Historically, low-income workers are more likely to spend the money they earn than putting it into savings.
With fewer people in the workforce, businesses are getting by with less. The pandemic forced some businesses to rethink how they operate. While it might potentially increase productivity in the future, it’s a hindrance to businesses now.
As businesses fully reopen, there are still people who are hesitant to return to work.
What’s helped give them a financial cushion are generous unemployment payments. Washington approved extra benefits in March that provide up to $300 extra on top of the normal state compensation.
Some workers now earn substantially more than they did when they last had a job. A person who works forty hours a week under the federal minimum wage, for instance, would earn just $290 a week.
This federal aid ends on Sept. 6, although 26 states have already ended extra benefits early.