People are quitting their jobs as if it’s 2007, which may be good news for worker paychecks.
Almost 2.8 million Americans voluntarily left their employers in September, representing 57.5 percent of total separations, based on seasonally adjusted data from the Labor Department. This percentage is the highest since May 2007.
As a result, U.S. workers could see a boost to their paychecks next year amid the labor-market turnover, said Nicholas Colas, chief market strategist at Convergex Group, an institutional equity-trading broker in New York. There’s a “very clear” correlation between resignations and pay raises that should continue because “people quit their jobs for better working conditions or better wages.”
Wages rose 2.3 percent in the third quarter from the same period a year ago, the biggest 12-month jump in almost six years, data from the Labor Department show. Voluntary departures lead salary increases by about 15 months, Colas said.
People are emboldened to switch jobs as confidence in the economy rises, Kobe said. The share of Americans who say business conditions are “good” minus the share who say they are “bad” remains positive, based on data from the Conference Board, a New York research group. This differential – at 2.8 percentage points last month, down from 3 points in September – has been positive since June and is near levels last seen in 2007.
As people “vote with their feet and take another job at a higher pay,” this forces some managers to reassess how much they compensate employees, said John Challenger, chief executive officer of Chicago-based Challenger, Gray & Christmas Inc., a human-resources consulting company. Businesses are more willing to invest in their workforce as quits increase, he said.
Wage growth has been “stubbornly held back” in recent years, though there are signs of gains ahead as the U.S. economy gets “closer and closer to full employment,” Challenger said. Central-bank policymakers project the longer-run jobless rate is 5.2 percent to 5.5 percent, according to their central- tendency estimate released Sept. 17, which excludes the three highest and three lowest forecasts.
At this stage of the expansion, which began more than five years ago, there are more “healthy” indications the labor market has stabilized, Challenger said. The jobless rate fell to 5.8 percent last month, the lowest since 2008, from 5.9 percent in September, Labor Department figures show. Meanwhile, U.S. employers added an average of 228,500 workers to payrolls in January-October, up from 197,300 in the comparable period last year and the most since 1999.
While there isn’t any “immediate danger” for the U.S. economy, a slowdown that affects labor-market turnover and wage gains can be difficult to predict, Kobe said.
In addition, corporate profit margins remain at higher- than-average levels for this point in an expansion, which suggests some business leaders might not be willing to sacrifice earnings to add headcount, Colas said.