The Big Quit and the Tightest Labor Market Ever

It is usual for businesses to report difficulty retaining qualified workers and attracting new ones, even in normal times. But the recent Job Openings and Labor Turnover Survey (JOLTS) report, with data through the end of November, confirms what many businesses know to be true: This time is different. 

An all-time record high 4.5 million workers quit their jobs in November, with quits hitting new records in accommodation and food services, healthcare and social assistance, professional and business services, and state and local government (excluding education). 

But replacing those workers is proving unusually challenging. Although businesses are advertising 10.6 million job openings, there are only 6.9 million unemployed people actively seeking them. That is an all-time record-low ratio of unemployed people to vacancies (0.62)—a sign that this is the tightest labor market ever.  

A Record-Low Ratio of Unemployed Job Seekers to Job Openings

Prior to the pandemic, there were usually about 2.3 unemployed people per job opening. Following recessions, that ratio has tended to surge: to 3.0 after the dotcom bubble crash, to 6.5 after the Great Recession, and to 5.0 at the bleakest point of the Covid recession. 

But it has now fallen more quickly than ever before and to the lowest point on record, thanks to a strong demand-driven economic recovery, paired with a protracted pandemic-induced decline in labor force participation. There are now 50.6% more job openings than before the pandemic overall, and over 100% more in manufacturing.   

A Record-Low Ratio of Hires per Job Opening 

The number of hires per opening is near the all-time record low reached in October after a dramatic post-pandemic drop. With so few candidates to choose from, employers are struggling to complete hires. In other words, job openings are yielding fewer hires than usual. 

Before 2015, there were usually more hires made during each month than vacancies left at the end of the month. But towards the end of the 10-year economic expansion following the Great Recession, job openings had soared above hires, with the hires-per-opening ratio falling to 0.76. That in itself was a remarkable development and it produced aggressive competition between firms for talent. 

But the pandemic economy has smashed all prior records. In November, firms only hired 6.7 million people, despite the 10.6 million job openings advertised, a ratio of just 0.65. 

Record-High Retirements and Quits

Given difficulty attracting new talent, employers are hanging onto the workers they have for dear life. Historically, layoffs and discharges have been fairly frequent, accounting for 40% of all separations from employment, on average. That share has now been below 25% for five straight months. 

While layoffs have fallen, quits and retirements have surged. Since 2000, about 1.9% of workers have voluntarily quit their jobs each month. The quits rate in November stood at a record-high 3% overall—and 6.4% in the leisure and hospitality sector. Quits have soared in establishments of all sizes, not only in small businesses, as was the case earlier in the pandemic. 

So-called “other separations”—a term that mostly refers to retirements—are also higher than usual. There have been 1.15 million “other separations” in the past three months—the most in one quarter since 2016. 

In other words, companies are not only battling record-high recruitment challenges, but retention difficulties, too. 

How Companies are Responding

An unprecedented challenge calls for an unprecedented response, and we are seeing companies snap into action across the economy. Data from ZipRecruiter job postings show the extent to which companies are peeling back job requirements and expanding hiring incentives, making this a golden age for job seekers. 

Written by

Julia Pollak is Chief Economist at ZipRecruiter. She leads ZipRecruiter's economic research team, which provides insights and analysis on current labor market trends and the future of work.

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