What is going on with the Quit Rate?
The Quit rate as published by the BLS has been stuck at 2.3% for 11 months in a row. This blog post notes that this is suspicious.
There are several reasons to be suspicious. The main reason is that no economic indicator that isn't exogenously set can be constant. It's not the federal funds rate we're talking about, it's the rate at which people quit their jobs. Quits should occur for several reasons, one is that the prospect of wage increases induce quits to take place; another is that a high job-finding probability should give labor market participants the courage to quit jobs they don't like in favor of something new. But wage growth is driven by people quitting their jobs - because it is the job-to-job transitions which garner the highest wage increases. This means that in order for wages to increase the quit rate must too. So what the heck is going on here?
Perhaps its rounding? Why does the BLS round JOLTS variables to one decimal point? Seems sketchy!
Anyway, I plan on developing further the arguments about the illogical state of the quit rate in future posts, so stay tuned...
There are several reasons to be suspicious. The main reason is that no economic indicator that isn't exogenously set can be constant. It's not the federal funds rate we're talking about, it's the rate at which people quit their jobs. Quits should occur for several reasons, one is that the prospect of wage increases induce quits to take place; another is that a high job-finding probability should give labor market participants the courage to quit jobs they don't like in favor of something new. But wage growth is driven by people quitting their jobs - because it is the job-to-job transitions which garner the highest wage increases. This means that in order for wages to increase the quit rate must too. So what the heck is going on here?
Perhaps its rounding? Why does the BLS round JOLTS variables to one decimal point? Seems sketchy!
Anyway, I plan on developing further the arguments about the illogical state of the quit rate in future posts, so stay tuned...