Is the Great Resignation Done and Dusted?
Way back when, about 18 months ago, I wrote that the so-called “Great Resignation” was an overstatement of labor market conditions. Instead, I preferred the term that LinkedIn Principal Economist, Guy Berger dubbed, the “Great Reshuffle”, which more accurately described the movement of workers throughout the economy, as they chased more money, better benefits, and enhanced flexibility.
A day before the June employment report was released and in anticipation of the Job Openings and Labor Turnover Survey (JOLTS) for May (the JOLTs data lag the jobs report by a month, for reasons that still make no sense to me), both the Wall Street Journal and the New York Times declared that the “Great Resignation” was done and dusted. (WSJ Americans Have Quit Quitting Their Jobs and the NYT, “The ‘Great Resignation’ Is Over.”)
A funny thing happened on the way to those dueling headlines: quits actually increased by 250,000 from April to May, bringing the total number to 4 million. Still, the editors did not have to feel squeamish on the call, as quits are down significantly from the August 2022 all-time series high of 5.18 million. As Olivia Cross of Capital Economics writes, while “labor shortages continue to ease, the report also brought signs of labor market resilience, with the hiring rate rebounding and layoffs remaining historically low.”
The monthly jobs report for June underscored the changing conditions in the U.S. labor market. The economy produced 209,000 jobs, which was the weakest gain since December 2020, as the once-hot sectors like wholesale, retail, transportation & warehousing, as well as temporary help, all shed jobs last month. Additionally, revisions to the two previous months combined for 110,000 fewer positions than previously reported.
The unemployment rate ticked down to 3.6 percent, from 3.7 percent, as the labor force increased by just 133,000. (Notably, all of the prime age workers (ages 25 to 54) have returned to the labor force, and more are working or actively seeking work than before the pandemic.)
Even with the labor market appearing to downshift, wages grew by 0.4 percent in June, putting the annual rate at 4.4 percent, as businesses, especially those seeking to attract blue collar workers, continue to pay up to attract and retain workers. Wage growth may be the key to the Federal Reserve’s next move. In the minutes from the June policy meeting, central bank officials noted that “Labor market conditions remained tight in April and May. Recent measures of nominal wage growth continued to be elevated, although lower than their highs last year. Over the 12 months ending in May, average hourly earnings for all employees increased 4.3 percent, below its peak of 5.9 percent early last year.”
Given the still-strong jobs numbers, most expect the Fed to raise rates by another 0.25 percent at the July 25-26 meeting, regardless of the results of the coming week’s reading on inflation. The median estimate for the June Consumer Price Index is a 3.1 percent increase from a year ago, which would be down from the previous month’s reading of 4 percent and for the core rate to slide to a 5 percent annual increase, which would be its lowest level since late-2021.