This post is by Eric Morath from Real Time Economics
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The labor market is surprisingly stagnant relative to a historically low unemployment rate.
The rate at which Americans are leaving their jobs–voluntarily or involuntary–was unchanged in November, at 3.5%, from a year earlier, the Labor Department said in a new report.
A consistent level of turnover in the labor market indicates employers are reluctant to let workers go, which is expected in a tight labor market. But it also shows workers are cautious about quitting their jobs—and that’s the surprise.
With the unemployment rate holding at 4.1% in the final three months of 2017—a 17-year low—it would be expected that workers could quit jobs they dislike and easily find new work.
Instead, the quits rate only edged up to 2.2% in November from 2.1% a year earlier, according to the Job Openings and Labor Turnover survey. The rate was unchanged in November from the prior months.
Workers may be more reluctant to switch jobs for several reasons. The long overhang from the deep recession may weigh on some workers’ psyches. Others may not find high enough wages elsewhere to change jobs. Workers are also less mobile, in part due to a spouse’s job or other family concerns.
Even at an industry level, churn that looks high compared with other sectors is lower than before the recession.
Turnover in the accommodation and food industry, 6% in November, was among the the highest of the sectors tracked by the Labor Department. That means about 1 in every 16 workers at restaurants, hotels and similar establishments left their jobs during November.
The turnover rate in accommodation and food service is elevated relative to other typically high-churn industries, such as construction, with a turnover rate of 4.9% in November, and retail, with a 4.3% rate in during the month.
But it’s still down from a prerecession rate of above 7%. That could mean some workers in that field aren’t finding opportunities to move up into better-paying industries. Such underemployment is a depressing factor for wage growth, which has been unspectacular in recent years.
Government work has the lowest turnover, with a rate of 1.6% in November. The pace of workers changing jobs in manufacturing, health care and the financial sector is also well below average.
Changes to the tax law could cause turnover rates to pick up modestly this year, said Josh Wright, chief economist at iCIMS, a recruiting-software company. The rewrite of the code, going into effect early this year, is expected to lower the tax burdens for many businesses.
“How are employers going to spend that windfall?” Mr. Wright asked. “It’s likely they’ll spend some of it paying more to recruit stars, and that could spark some pick up in turnover.”