Will Quits Keep the Unemployment Rate High?

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May 25, 2010

In February and March, 2010 the number of workers who left their jobs voluntarily exceeded the number laid off according to the Bureau of Labor Statistics.  The table below uses data from the BLS web site, specifically tables B and 4.[1] According to the Wall Street Journal, February was the first month since October, 2008 that layoffs were less than quits.

February, 2010

March, 2010

Quits (voluntary separations)

1,851,000

1,868,000

Layoffs (involuntary separations)

1,823,000

1,830,000

Total

3,674,000

3,698,000

This is a bit of good news.  When people leave their jobs voluntarily it usually means they either have a new job lined up or don’t believe they will have much difficulty finding a new job.  Increased optimism in the labor market is always good news.

But, like so many economic events, there is a potential downside to this.  Take a look at the totals above.  The total entrants to the labor force are increasing, despite the fact that layoffs only increased slightly between February and March.  The large number of quits could put upward pressure on the unemployment rate.

The key issue is the number of those quitting who already have new jobs lined up.  Those folks will only be temporarily unemployed and won’t matter much over the next six months.  But those who quit without have immediate employment prospects are likely to remain unemployed for a while.[2]

So what do you think, folks?  Will the large number of quits cause the unemployment rate to rise or fall?  Feel free to do actual research – it took me long enough just to find the data above on the BLS web site!


[1] http://www.bls.gov/news.release/jolts.nr0.htm.  Accessed May 25, 2010.  Table B is in the main text of the press release, while the link to table 4 is at the bottom of the page.

[2] A third group, those who quit to leave the labor force, is likely to be small given the severity of the current recession.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.