January 30, 2022

by Stephen Stofka

Every week I read about the Great Resignation. What is it? The number of people quitting their jobs is at a historic high. In the leisure and hospitality industry, the number of quits is up 20% from pre-pandemic levels. In retail jobs, quits are up 16%. People quit their jobs for a lot of reasons. In more normal times, a higher quit rate indicates a greater confidence in finding another job. As the quits rate goes up, the unemployment rate goes down. I’ve inverted the unemployment rate to show the historic trend between job quits and unemployment.

These are not normal times. Employees in public facing jobs are enduring abuse from patrons. We have lost a social cohesion, an agreement on the rules of civility. In response to physical threats to employees over mask wearing, Denver’s Children’s Museum closed for ten days. According to the FAA, the number of active investigations into unruly passengers climbed 7-fold in 2021. The number of quits in healthcare field, in the leisure and hospitality industry, education, and food services are all more than 1/3 higher than pre-pandemic levels. In professional services, quits have increased by 28%. In the retail sector, the growth is only 18%.

In the South and Midwest regions that the Labor Department surveys, the quits rate has climbed 30%. According to US Census data almost 40% of the country lives in the Southern region and is the fastest growing region of the country. The Midwest region has about half the population, has recently experienced a slight population decline, but is experiencing the same job churn. Are people moving from the Midwest to the South? In the Western and Northeastern regions, the quits rate has grown more modestly – at 20-22%.

The first estimate of last quarter’s real GDP growth was an annualized 5.5% growth (GDPC1). That’s real growth after subtracting the effect of inflation. Household purchasing grew by a strong 7.1% after inflation (PCEC96). How much have households borrowed to fund that buying spree? 3^rd quarter real debt rose by only 2.5%, easing slightly after the first two quarters of last year (CMDEBT/PCEPI). We won’t have 4^th quarter debt levels until early March but real debt levels are still below the peak of 2007 when households had gorged on debt. Until the financial crisis in 2008, real household debt was growing 7-8% per year then went negative for six years after the crisis. Household debt did not rise above a 1% growth rate until the final year of the Obama presidency.

Households have a historically low debt burden as a percent of disposable income (TDSP). If a household’s monthly income after taxes is $1000, the average debt payment is less than $100, near a four decade low. There is a lot of guesswork in this series but the important thing is the declining trend in the data. People are not borrowing beyond their means as they did during the 2000s. Do lower debt levels mean that buying pressures will remain strong? Will another Covid variant further strain hospital staff and resources?

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Photo by Clem Onojeghuo on Unsplash