April 16, 2015
One of the most underutilized sources for labor market data is the Job Openings and Labor Turnover Survey (JOLTS). The survey provides valuable information on a host of topics, including how and why people leave their jobs.
JOLTS tracks the number of “total [job] separations” that occur in any one month. They break these job separations down into three categories: “quits,” “layoffs and discharges,” and “other separations.” According to the April news release of the February JOLTS data, the “other separations” category includes “separations due to retirement, death, and disability, as well as transfers to other locations of the same firm.”
Ideally, we’d prefer that people leave their jobs by quitting. If workers are quitting their jobs, they are leaving their jobs voluntarily; they may be moving to better jobs, returning to school, deciding to become stay-at-home parents, etc. By contrast, if workers are being laid off, they are leaving their jobs involuntarily due to decisions made by their employers. Even the category “other separations” consists of at least some negative experiences for workers.
It should therefore come as a relief that workers are increasingly leaving their jobs by quitting. During the first six months of 2007, quits represented 57.9 percent of all job separations. By April of 2009, just 37.1 percent of all separations were due to quits, while 55.5 percent were due to layoffs and discharges. However, since 2009, the number of workers quitting their jobs has been increasing, while the number of workers being laid off has been declining. In February of 2015, quits represented 57.8 percent of all job separations, meaning that the percentage of separations attributable to quits has almost fully recovered:
Quits have represented over 57 percent of all separations for three of the past four months for which we have data. In November 2014 and January 2015, they were 57.5 percent of all separations; and in February, quits constituted 57.8 percent of all separations, the highest rate since May of 2007 (when unemployment was 4.4 percent).
Another measure of mobility within the labor market would be the ratio of quits to layoffs and discharges. During the first half of 2007, approximately 1.66 workers quit their jobs for every one worker who was laid off; the ratio fell below 1 and remained there for 17 straight months between 2008 and 2010. Yet last February, about 1.69 workers quit their jobs for every laid off worker, the highest ratio since May 2007.
This improvement in the labor market is being driven primarily by a decline in layoffs. The quits rate—the percentage of workers who quit their jobs in a given month—was 1.9 percent in February, down slightly from its December 2007 rate of 2.0 percent. At its peak, the quits rate has even been as high as 2.6 and 2.5 percent, respectively, in January and February of 2001. The main reason why we see a normal ratio of quits to layoffs in today’s economy is that layoffs are quite low. The layoffs and discharges rate was 1.1 percent in February 2015, tying the record for the lowest rate since JOLTS came into existence in December 2000.
It’s not clear exactly why the percentage of job separations attributable to quits is so close to complete recovery. After all, other measures of the labor market, such as rates of employment and wage growth, indicate that the market is actually quite far from recovery. Some might attribute this improved job mobility to the Affordable Care Act (ACA): when people’s ability to buy health insurance is no longer directly linked to their employment status, they are given greater freedom to quit jobs they don’t enjoy. I’m skeptical of this argument, partially because the quits rate increased about the same amount between 2013 and 2014 as it did between 2012 and 2013, and partially because the lower rate of layoffs is the main driver of the declining quits-to-layoffs ratio. Having said that, the full recovery of the quits-to-layoff ratio has certainly disproven the claim that the ACA would lead to “job lock.” Even if we can’t say that the ACA has improved workers’ mobility within the job market, we can certainly say that it hasn’t hurt it.
On the whole, this is a development worth celebrating. While the labor market still needs to recover much of the employment that was lost during the recession, employment and unemployment aren’t the only variables that measure workers’ well-being. At this point, most workers who leave their jobs are doing so voluntarily, and in February, the layoffs and discharges rate hit an all-time low. This represents a positive change in the lives of many workers, and such an improvement shouldn’t go unnoticed.
