Reduce to a Simmer
The latest indicators from the labor market suggest the Great Resignation may have tendered its own resignation.
The rate at which American workers quit their jobs skyrocketed during the pandemic, but now seems to be winding down. This shift is an important signal that the once-sizzling labor market could be cooling off.
As resignations reach toward pre-pandemic levels, another piece of the complex puzzle of economic recovery may fall into place.
In May, four million Americans decided to voluntarily leave their jobs, according to the latest data from the US Labor Department.
While this might sound like a lot, it actually represents a significant drop from the record 4.5 million who called it quits in November 2021. Zooming out, the resignation rate averaged out to 2.5% between March and May, marking a drop from the 3% seen in April 2022 and only slightly above pre-pandemic levels.
The latest data suggests the labor market is gradually moving away from the so-called “Big Quit.” Notably, resignations are still hovering slightly above pre-pandemic levels. But this dip suggests that workers are gaining more satisfaction from their current roles — or feeling less confident in their ability to secure new ones.
The Bigger Picture
Whatever the reason, a stabilizing job market could be good news for the Federal Reserve during its ongoing battle to keep inflation under control.
When workers switch jobs, they often command higher salaries, which can fuel price increases on a maro scale. As voluntary quits slow, so might the salary bumps. As the labor market cools, it could cool off inflation along with it.
That said, a softer labor market can have mixed implications for individual workers. On the bright side, it could mean more stability, less competition, and a better work-life balance as companies strive to retain staff. On the other hand, it could suggest the rapid job growth and salary bumps seen recently may begin to slow.
For workers, the perfect balance between job satisfaction, wage growth, and career goals might feel just as complex as the Fed’s fine line. But if this latest data is any indication, Americans as a whole are a little closer to finding it.
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