Good news! Americans are quitting their jobs at a rapid rate

Image: Reuters/Kai Pfaffenbach
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It’s good to have a job, but it’s even better to quit one.

According to recently released data from the US Bureau of Labor Statistics (BLS), more than 3.2 million people quit their jobs in May 2017, the most Americans to quit in a month since early 2001. It’s also the highest rate of quitting since June 2006.

This might seem concerning. If a lot of people are quitting at a company, it’s usually a sign that the firm is doomed. But a high quit rate at the national level is great news. In fact, it’s one of the leading indicators of a healthy labor market.

The act of quitting is the ultimate sign that a person is optimistic about their job opportunities. “When do people quit their jobs? They quit their jobs when they are moving to another job or they think another job is out there or available to them,” BLS economist Guy Podgornik told National Public Radio’s Marketplace.

Why are Americans so confident? Probably because the vacancy rate—the number of open jobs for each unemployed person—is higher than it’s been in a long time. The quit and vacancy rate have a close relationship, where open jobs can encourage restless workers to quit, in turn creating new open jobs.

A strong labor market with lots of churn means harder work for recruiters. The average job in the US now takes over a month to fill, compared with 15 days during the worst of the financial crisis. 

Economists remain puzzled, however, that the stronger labor market hasn’t translated into higher wage growth. Although the unemployment rate is back to pre-recession levels, wage growth has been stuck at a so-so rate for several years now. However, it’s possible stronger wage growth will emerge soon.

The US Federal Reserve collects anecdotal information about economic conditions in each of its regional banks’ districts. According to the Fed’s most recent report, most companies say they now spend more time on recruitment.

“Workers appear to have less loyalty to the job, and more job-hopping is showing up on résumés,” the Philadelphia Fed wrote. “However, one large retailer reported having no difficulty getting quality job candidates in locations throughout the District after raising its base wage last year.” Perhaps more companies will soon employ this radical strategy to fill their open positions, too.