As a marker of the strength of the economic recovery as the U.S. emerges from the pandemic, consider the rebounding “quit rate,” i.e. the rate of voluntary resignations. While the quit rate fell to near-record lows in 2020 as workers postponed career moves, the data suggest that a surge in turnover is already beginning to occur, with clear implications for office-using employers, reports Newmark’s Garrick Brown.
“Employee turnover rates largely reflect the strength of the job market,” Brown writes in a Newmark Western Region Insights report, Work-From-Home and “The Big Quit.” When unemployment is low and the job market is more competitive, “workers are more likely to make moves both because there are more opportunities and because they also have greater confidence that they can find a better situation if they are unhappy in their current roles.”
The quit rate climbed steadily for a decade as unemployment rates fell to 50-year lows by early 2020. But then came the pandemic. Bureau of Labor Statistics data say that 36.4 million American workers quit their jobs in 2020, compared to 42.1 million in 2019.
“Against 2020’s backdrop of heightened economic uncertainty, 5.7 million fewer employee resignations makes sense,” writes Brown. “Workers that were already unhappy with their current work circumstances largely ‘sheltered-in-place’ and rode out the storm. These numbers alone suggest that, given no other factors, there is likely pent-up ‘resignation demand’ in the marketplace.”
With the job market heating up, the employee quit rate has already begun growing. It surged 20.9% between February and March 2021, the latest month for which data are available. “That trend has almost certainly continued and anecdotal evidence suggests it has intensified,” Brown writes.
Although most of the employment growth ahead will be from the rebounding service sectors, “we expect robust expansion across the board,” writes Brown. “Given the complexities around WFH trends, this could create a perfect storm of labor and wage pressures for office users.”
Since the market for skilled labor remains the tightest of all—3.2% unemployment for workers with four-year degrees—this means that office-using employers are in the “early stages of what will be a period of heightened employee turnover,” he writes. “The velocity and magnitude with which this occurs will depend largely upon employment growth levels by sector in the months ahead. Substantial turnover rates will place upward pressure on wages.
“But there are some indicators that already suggest the turnover rate will be substantial. While the health and safety concerns of some workers returning to in-person work will certainly play a role, the bigger driver may likely be economic.”
Brown concluded, “Given the labor pressures ramping up, it is critical that employers navigate the return-to-work process with extreme caution. The challenge for organizations in the immediate term will be demonstrating flexibility and patience as they seek to balance employee concerns with the need to reopen. Those that don’t, risk the challenge of even greater near-term labor disruption.”