Job quitting fell 12% last year. Good or bad?
What is happening:
Workers called it quits less frequently in 2023. Americans quit 6.1 million fewer jobs last year than in 2022—a decline of 12% according to the Labor Department. In December, the number of jobs that were quit fell to the lowest monthly level in three years. That is a turnaround from the years just after the pandemic took hold, when resignations surged and companies faced labor shortages. In 2021 and 2022, employers put up billboards seeking workers, eliminated background checks, offered big raises and handed out signing bonuses to restaurant and factory workers. In more recent months, prospective job seekers have seen news of high-profile layoffs, smaller pay bumps and sharp slowdowns in hiring in certain industries. Those pockets of weakness stand in contrast to years of consistent overall job growth and a historically low 3.7% unemployment rate at the end of last year.
Why it matters:
“On the surface things look really good and robust but when you dig deeper it’s a labor market that is being driven by a narrower set of industries and is showing signs of substantial slowing,” said Brett Ryan, senior U.S. economist at Deutsche Bank. Just three industries, leisure and hospitality, government and healthcare, accounted for the bulk of job creation in 2023. Fewer resignations could mean workers are less confident in their ability to find a new job or more content in their current roles. The total number of job quits declined to 44.5 million in 2023 from 50.6 million in 2022, which was the highest on record.
A pessimistic workforce can have profound and far-reaching consequences on the economy, affecting productivity, innovation, consumer spending, and overall economic growth. When employees harbor negative sentiments about their work, job prospects, or the broader economic outlook, it creates a ripple effect that permeates various aspects of the economic landscape. Productivity, a key driver of economic success, is significantly impacted by the mindset of the workforce. Pessimistic employees may experience reduced motivation, engagement, and job satisfaction. This decline in morale can result in lower levels of productivity as employees may be less likely to invest discretionary effort into their work. Consequently, businesses may face challenges in achieving optimal output and efficiency, hindering their ability to contribute to overall economic growth.
Innovation is another casualty of a pessimistic workforce. A lack of optimism can stifle creativity and risk-taking, essential components of the innovation process. When employees are apprehensive about the future or feel uncertain about the stability of their jobs, they may be less inclined to propose or embrace new ideas. This reluctance to innovate can impede a nation's ability to stay competitive in a rapidly evolving global economy, limiting its capacity for technological advancements and industrial progress.
Consumer spending, a critical driver of economic activity, is intricately linked to the mindset of the workforce. Pessimistic employees may curtail their spending habits due to concerns about job security, wage stagnation, or economic instability. When a significant portion of the workforce adopts a conservative approach to spending, it can lead to a decrease in demand for goods and services. This, in turn, affects businesses across various sectors, leading to reduced revenues, potential layoffs, and a further contraction in economic activity.
Investment decisions by businesses and individuals are also influenced by the overall optimism or pessimism prevailing in the workforce. When businesses sense a lack of confidence among consumers and anticipate weaker demand for their products or services, they may postpone capital investments or expansion plans. Similarly, individuals may delay major purchases or investments, such as buying homes or starting businesses, exacerbating the economic slowdown.
The impact of a pessimistic workforce extends beyond the immediate economic indicators. It can contribute to a self-fulfilling prophecy, where negative expectations become reality as businesses retrench, consumers cut back on spending, and investment dries up. This downward spiral can create a protracted period of economic stagnation or recession.