More confident, people are quitting jobs: Why that may be bad
Getting ready to quit your job? Some economists think you're a sign that the recovery is finally picking up momentum.
But this rosy scenario may be overlooking several forces that don't necessarily bode well for the economy over the long term.
Apparently, your co-workers are increasingly in the mood to give notice, too. The latest monthly government data show the so-called quit rate—or the percentage of workers each month who break the news to their boss that they're moving on—has been rising steadily as the job market continues to improve.
The rise in quits is being driven, in part, by a rise in the number of job openings, which are now more plentiful than any time since 2008, according to the so-called Job Openings and Labor Turnover Survey, or JOLTS report, released on Tuesday for December. Roughly 2.4 million employees are pulling up stakes each month, while the number of monthly open jobs has hit 4 million.
The increasing numbers show the economy getting stronger, the theory goes, because workers are getting confident enough to take on the risk of changing jobs—or leaving the workforce altogether. (Earlier this month, one woman felt confident enough to break the news to her boss in a SuperBowl ad, but the Bureau of Labor Statistics doesn't break out how you give notice.)
(Read more: US economy may be stuck in slow lane for long run)
The rise in unfilled job openings also means employers are having a harder time finding qualified candidates, which is usually a sign they'll have to start offering higher wages to fill those jobs.
That could help break the long streak of stalled growth in wages, which have more or less flat-lined since the Great Recession began. Higher wages help boost consumer spending, which spurs demand for goods and services, which in turn leads to more hiring. And the virtuous circle keeps turning.
But the story told by the JOLTS data isn't entirely good news.
For one thing, while more workers are quitting, employers haven't picked up the pace of job creation as quickly. Four years after job creation bottomed after the Great Recession, the pace of hiring and the number of job openings are still well below the same point in the recovery from the 2001 recession.
(Read more: Stagnation by design)
Many of the jobs being created demand workers with specialized or advanced skills that companies are having a hard time finding. Those who don't qualify are having an even harder time finding work.
"The changing skill needs of employers in today's economy have left unemployment high even as more businesses look to hire," said Wells Fargo's chief economist, John Silvia, in a recent note. "For those without the right skills or in the wrong location, spells of unemployment remain painfully long, averaging 37.2 weeks."
The quit rate is also getting a boost from the new health-care law, which is freeing millions of workers who went to work every day just to get health insurance. A recent CBO report estimates that over the next decade, some 2.5 million people will leave the workforce because they can now get affordable health care without relying on an employer to pay for it.
Some of those workers who quit because they can afford health care on their own may start a new business, creating more jobs and wages for others who are ready for a new professional challenge. Other work refugees, though, may sign up for subsidized insurance, grab the nearest backpack and head to the beach in Phuket, Thailand.
That's especially true for younger workers, who have been leaving the workforce in greater numbers than their older cohorts—a trend that analysts at the BLS predict will continue through the next decade.
To be sure, many of those packing up their cubicles and leaving the workforce for good are at the end of their careers. A rising stock market may help convince workers nearing retirement that their nest egg is big enough to give notice. But they're no longer producing goods or services, and retirees tend to tighten spending more than new hires who just won a salary bump to change jobs.
Lastly, the rise in the quit rate isn't just because workers are feeling more confident about finding a better job. Much of the job growth since the recession ended, for example, has been in low-paying industries like retailing, food service and hotels, where turnover has traditionally been higher.
Continued growth in these low-skill, low-wage jobs likely won't do much to boost wages and consumer spending.