Labor Shortages Shift to Higher-Paying Industries, “Quits” Decline for Second Month but Still in the Astronomical Zone
Is the collapse of the formerly high-flying stocks bringing day-traders back into the labor force?
By Wolf Richter for WOLF STREET.
Job openings in January remained at the upper end of the astronomical zone, the second highest ever, just a hair below the record set in December. Companies reported 11.26 million job openings (seasonally adjusted), up by 57%, or by 4.1 million, from January 2020. The astronomical zone started developing in mid-2021.
These job openings in the JOLTS data from the Bureau of Labor Statistics are not based on online job postings but on a monthly survey of 21,000 nonfarm businesses and government entities, asking them how many actual job openings they had at the end of the month.
“Quits”: 4.25 million workers voluntarily quit their jobs in January (seasonally adjusted), the second month in a row of month-to-month declines, something we haven’t seen since April 2020. The quits remained in the astronomical zone – it’s just that there are fewer people quitting their jobs as companies’ efforts to retain employees by offering higher pay and better working conditions may be bearing fruit.
Quits do not include involuntary separations. A high rate of quits with a high rate of hiring – the current conditions – are a sign that companies aggressively poach workers from each other. When I hire someone away from you by offering them the greener grass, I report this new employee as a “hire,” and you report the employee that walked out on you as a “quit.” On net, between the two of us, employment didn’t change. It was just churn.
Poaching and the massive churn that comes with it has been the dominant reason for quits, given the large amount of hiring going on at the same time: as employers reported that 4.25 million of their employees quit their jobs, employers also reported that they hired 6.46 million new people.
This astronomical rate of quits over the past 10 months shows that power in the labor market has shifted toward workers as many of them either have already found, or a confident that they will find better opportunities somewhere else. And companies need to adjust to that by offering better opportunities, more money, and better working conditions in order to retain their employees.
People also quit jobs to exit the labor force – to retire, to spend more time with their stocks and cryptos, to take care of someone, or whatever. And there was a lot of that earlier in the pandemic, but the labor force has been increasing sharply in recent months and is now nearly back to pre-pandemic levels, according to separate data from the BLS on the labor market. The labor force consists of people who either have jobs or are actively looking for a job:
The shift in job openings to higher-paying industries.
Job openings were very high across all categories of employers, but in some categories started dipping from the astronomical zone, while hitting new records or staying at records in other category of employers. And we’re starting to see a pattern.
Job openings fell from records in Leisure and Hospitality, Arts and Entertainment, Retail, Transportation Warehousing and Utilities, and Wholesale Trade. The declines could be a sign that aggressive hiring and retention efforts are starting to bear some fruit, and companies are able to fill some of their job openings.
For example, the job openings in Leisure and Hospitality, where wage increases have been particularly sharp in order to get people to come to work, fell sharply in January (seasonally adjusted) but are still in the astronomical zone:
Job openings in higher-paying industries rose to records, or stayed at records, including in Professional and Business Services, Healthcare and Social Assistance, and Education and Health Services.
For example, employers in Professional and Business Services reported 2.065 million job openings, the highest ever, up by 62% from two years ago:
The labor shortages overall remain in the astronomical zone and are large and disruptive for companies that cannot staff up to levels they want to, and they’ve increased pay to attract and retain talent. And workers have discovered their negotiation power and new flexibility among employers.
But we’re now seeing more people being drawn back into the labor force, for whatever reason.
Some of them may have blown all their stimulus and PPP money and their retirement money on stock and crypto bets gone awry – with stocks of many high-flying companies down 70% and even 90%, which when leveraged, wipes out the capital. And it may be time to get back and get a job – and there hasn’t been a better time to do so in many decades. A rout in asset prices could well bring more folks back into the labor force – which is what happened during the dotcom bust as well. Many of them are among the smartest folks out there, and it would be great to have them back in the labor force to accomplish something real.
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This Stock Market Is Coming Unglued Stock by Stock. The mayhem that has totally crushed one stock after another for a year breaks through the surface