“People quit their jobs everyday. There are lots of reasons why yet underlying all the reasons typically is a single reason: they see a better opportunity elsewhere”— Paul Ebeling
The better opportunity does not always mean another job in the labor force. It could be the opportunity of going back to school. It could be the opportunity to stay at home and raise 1’s children. It could be the opportunity to start their own business. It does not always mean finding a better-paying job either. It could be driven simply by a desire to find better working conditions. Who knows…
What is telling about the Job Openings and Labor Turnover (JOLTS) data is that both the nonfarm and private quits rate: the number of quits during the entire month as a percent of total employment hit a record high in July.
It comes as no surprise to learn that employees quit their jobs more readily when economic conditions are good. As the quits rate dropped sharply at the start of the VirusCasedemic, which was not exactly a good time to be quitting 1’s job.
In the months ahead, the economy rebounded sharply. Coincidentally, the quits rate also rebounded sharply in those ensuing months.
That rebound was not a vote of confidence in the recovery. It was a reflection of the ongoing effects of the chaos, which required added childcare coverage as schools went fully remote or to some form of a hybrid model.
We do not why, but we do know that prices go up when demand is high for something in short supply, and labor is in short supply. Wage pressures are clear in certain sectors of the economy, but from Fed Chairman Powell’s vantage point, the wage pressures are not spiraling into broad-based inflation pressures. We are looking for confirmation of that outlook later today after the FOMC policy meeting.
There is a belief, that coming months should see an easing of some of the labor supply pressures as COVID fears lessen with effective vaccines, the pursuit of employment picks up with enhanced unemployment benefits having expired, schools continue to run normally, and global economies continue to rebound.
It stands to reason that if wage pressures persist and grow more pronounced, then inflation pressures are apt to remain more difficult than the Fed thinks.
That’s not what the Fed is anticipating, but if the Fed is wrong, investors may start quitting the stock and bond markets at a higher rate, jolted by the specter of rising interest rates and moving vast sums of money into crypto assets.
Have a prosperous day, Keep the Faith!