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Quit Rate on the Rise

January 21, 2022

The quit rate saw a record high in December - what is contributing to these trends, and where are they headed next? Catch our newest TrendsTalk episode with ITR President and Speaker Alan Beaulieu to learn more.



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The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hi everyone. I'm Alan Beaulieu, President of ITR Economics, and this is going to be fun. We get to talk about labor today, and I know there's all kinds of stressors on labor. And I know that we hear about quit rate being a record high in the month of December. And we hear about job openings. And you may even have heard that job openings are going down, and they are. That's because of the seasonal nature of what's going on.

I looked into the Northeast, the Midwest, the west south, and there are a lot of job openings in each of those states. They're down from their record highs, and the region that added an October high was the Midwest. Others were in July of 2021. And they've been in decline. Normal trends, slight aberrations, some months a little steeper, some months not as steep, but overall very normal.

So you're still faced with a labor problem. And the quick index makes it seem like, well, you know what? People are just going to leave. And they are. And we've talked before in person about, what do you do about that? And all of our speakers have. I know that I have, about how we have to deal with culture, and what folks want for jobs, and all the rest of that. I don't want to do that today. I want to talk to you about how that quit rate is going to be coming down. You heard me. It's going to be coming down.

How do I know that? Because we know through leading indicator input and our cyclical theories, that the rate of growth in the US economy, specifically US industrial production, will be slowing down in 22. Picture it in your head, 12/12 rate-of-change has been going up in phase B. It's been fun. It's been exciting. It's been just driving you crazy, because the supply chain, separate issue. I'm writing a blog about that tomorrow.

But the reality is, when it comes to labor, as the 12/12 rate-of-change for industrial production bends over, and starts to move lower in phase C, guess what always happens? That quit rate moves with it. You guessed it. So the quit rate is going to go down, and it's still going to be a pain in the neck. It's still going to be something you have to deal with, but not with that same crushing pressure that, oh my goodness, how do I deal with this? It's just going to slowly get better as we go through 22 and into 23.

And here's the fun part. As that quit rate comes down, so does the employment cost index on a rate of change basis. That doesn't mean that your wage rates are going to go down, not at all, but it means the wage pressures that you've been under are going to go down. It means that the cost is going to go up, but not at the today's pace. I hope you did not give out raises of 6.2% when CPI was at a 40 year high, you're stuck with that one.

If you did not, don't, because you're going to find that the employment cost index goes up at a milder pace than what we've seen in the last several quarters. We're going to see that inflation slow, it abates temporarily, and then it's going to move back at a more systemic rate, which is going to give time for a buildup. Today's pressures have been brought about by a government shutting down the economy. It's been a pent up demand, over stimulus, too much excitement. Don't forget the COVID mess. And all of that's going to result in a situation which seems like it's just going to be with us forever. It's not.

The indicators are already there. Let's go through it again. Quit rate comes down, employment cost index rate of change comes down, so that it goes up at the milder pace. And you, my friends, will begin to breathe easier, you begin to see light at the end of the tunnel. And you're going to find yourself going into a world tomorrow that you recognize.

I'm Alan from ITR Economics. I hope you have a great day. See you next time.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.