Nearly 4.5 million people quit their jobs last month, and the number of job openings continued to hover near record highs, with nearly twice as many open positions as unemployed workers.
In February’s Job Openings and Labor Turnover Survey, or JOLTS, which was released Tuesday, the U.S. Labor Department found that there were 11.3 million open jobs last month, slightly below the record of 11.4 million set in December and about in line with the 11.3 million job openings at the end of January.
Economists say that with nearly two unfilled jobs for each of the 6.3 million unemployed workers the government counted in February, employees are in a stronger position today than they have been in decades.
“It is truly an extraordinary market for the American worker,” said Mark Zandi, the chief economist at Moody’s Analytics. It is clear that workers know that and that employers do, as well: 1.4 million workers were laid off last month, in line with the same number in January.
“Layoffs are extraordinarily low. Businesses are very reluctant to lay off workers because they know getting them back will not be easy,” Zandi said.
As employers contend with nearly twice as many open jobs as there are workers available to take them, they are raising pay and benefits, as well as offering greater flexibility and mobility.
“The Great Resignation is still in full swing as workers use increasing job openings as an opportunity to move on to better jobs,” Daniel Zhao, a senior economist at Glassdoor, said by email.
Economists say the historic opportunity to achieve wage gains and mobility will begin to wind down over the year — so people who have been waiting to rejoin the workforce should make their move soon, Zandi said.
“These are the very, very best times for workers — literally — right now,” he said. “The window for finding another job is wide open, but it’s going to start closing shortly. … It’s getting to be time to make a decision.”
With average annual wage growth of around 5 percent, a growing number of disengaged workers have already done so. “With the elevated wages that workers are earning, it’s causing some people to rethink staying on the sidelines and pulling people back into the labor force,” said Ken Kim, a senior economist at KPMG LLP.
Kim said a wave of new workers would counterbalance rapid wage gains that have pressured the bottom lines of companies, especially small businesses, and made policymakers increasingly nervous about the prospect that inflation could become intractable.
“That would actually help tamp down wage pressures, because the available pool of labor is bigger,” Kim said.
The current demand for workers is so high, however, that economists say the influx of new workers will only moderate, not reverse, the trajectory of wage gains.
“If we see demand for workers level off at these high levels, even as we see some return of workers, it does look like wages will continue to grow at quite a brisk pace,” said Nick Bunker, an economist and the head of research at Indeed.com.
The behavior of those already in the workforce also reinforces the trends. A recent Bankrate.com survey found that about half of already employed people plan to look for new jobs in the next year. Because workers tend to realize their most significant wage gains when they switch jobs, the longer the elevated level of churn remains a feature of the labor market, the more it could entrench an inflationary feedback loop that worries policymakers, said Mark Hamrick, Bankrate’s senior economic analyst.
“That is that wage-price spiral that Federal Reserve officials are so concerned about,” he said.
Keith Buchanan, a portfolio manager at Globalt Investments, said: “What we’re seeing so far with the JOLTS report has been kind of the centerpiece of how sticky the employment situation has been and how workers have re-evaluated their relationship with work. Workers [are] demanding more wages and more flexibility. I think it’s a sign of the times, frankly.”
More bargaining power has been a long time coming for workers, especially low-wage workers and the vast majority of the nonunionized private sector, but sustained wage growth above the 3 percent to 4 percent that most economists consider sustainable runs the risk of backfiring by triggering an aggressive response by Federal Reserve officials to curtail economic growth and, with it, demand for workers.
“Inflation is very high right now, and they’re obviously taking steps to bring inflation down,” Bunker said. “The concern for job seekers is that, in doing so, they could really reduce the demand for workers.”
Buchanan said, “The higher that job openings remain, there’s more and more anticipation of that being a barometer of inflationary pressure.”
Because sustained wage inflation is very hard to reverse, millions upon millions of unfilled jobs could be viewed as a signal to policymakers that a more aggressive response is needed.
“The wage-price spiral is a term that normally has very negative connotations, and … it’s already underway,” Buchanan said. “Where does the buck stop? That’s the big question the market is grappling with.”
Zandi said the dynamic should inject a sense of urgency into the job searches of those not working, as well as the currently employed.
“The Federal Reserve is working really hard to slow down growth,” he said. “The best opportunities are available now. Six months from now, they are going to be less available and a year from now even less so.”