If you’re looking for some good news about the economy after last Friday’s lackluster jobs report, try this on for size: the latest data indicates that more Americans are quitting their jobs, which means two things: 1) an immediate boost in pay for many workers voluntarily hopping from one job to another, and 2) an increased sense of confidence that workers can find a better job somewhere else. All of this could finally translate to an increase in wages, even for employees who stay put.
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“Nearly 2.8 million employees voluntarily quit their jobs in January, up 17% from the year before, according to the latest government statistics,” writes Matt Egan at CNN Money. “The quit rate, which measures the number of quits as a percent of total employment, ticked up to 2% from 1.7%. …Quitting stats provide a glimpse into workers’ willingness and ability to leave their jobs and find better employment elsewhere.”
Prior to last month’s report from the Labor Department, the economy had grown by 200,000-plus jobs for the past six months. 2014 as a whole was the best year for employment since 1999, with an average of 224,000 jobs added per month.
Wages have been the missing piece of the puzzle. Last month saw a rise of 7 cents an hour to an average hourly wage of $24.86, but the past few months have been largely stagnant for wage growth. The PayScale Index forecasts a 1.7 percent increase in pay for the first quarter of 2015, but The Real Wage Index, which compares earnings against inflation, shows a decrease in the buying power of those wages of 7.5 percent compared with 2006. In short, even months of blockbuster jobs reports haven’t so far translated to higher earnings for workers.
“It isn’t clear why wages aren’t rising faster,” wrote Ben Casselman in a FiveThirtyEight post dated Jan 13. “One possibility is that the economy just hasn’t improved enough yet. Maybe if the workers-to-jobs ratio improves a bit more, employers will finally have to start offering raises. Or perhaps the ratio exaggerates improvements in the labor market because there are lots of workers who want jobs but don’t officially count as unemployed.”
Casselman also notes the possibility of a structural problem in the US economy that makes the wage problem more complex than simple supply and demand. Declining union membership, for example, means a workforce with less bargaining power, while the global economy makes it easier for employers to take their job openings to less-expensive, less-regulated corners of the world.
Still, as economic indicators go, a higher quit rate is nothing to sneeze at. On a micro level, perhaps it will give individuals the confidence to dust off their resumes, research their salary compared against others’ in their field, and start looking forward to their next job opportunity.
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