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Home / Commentary / The Great Resignation: Historical data and analyses show it’s not as great as generally believed

The Great Resignation: Historical data and analyses show it’s not as great as generally believed

Jay L. Zagorsky is a senior lecturer on markets, public policy and law at Boston University

The so-called Great Resignation was one of the top stories of 2021, as apparently “record” numbers of workers were reported to be quitting their jobs.

The latest figures came out on Jan. 4, suggesting that 4.5 million people voluntarily left their positions in November – marking an “all-time high,” according to the agency responsible for collecting the data. That’s 3% of the nonfarm workforce, which headlines also proclaimed a record figure.

But is it?

The “quit rate” interests me because I wrote my economics doctoral thesis on how people find work. Since then I have been interested in how people leave jobs and then find new ones.

Tracking ‘quits’

Data on people quitting comes from the Bureau of Labor Statistics.

Every month the bureau runs the Job Openings and Labor Turnover Survey, also known as JOLTS. The bureau interviews about 20,000 businesses and government agencies and uses what it learns to make various estimates about the workforce, including the number of people who quit, retired, were hired or were fired.

Since April 2021, the share of nonfarm workers who quit their jobs has been at some of the highest levels recorded by the bureau. In all, nearly 33 million people left their positions in this period, or over a fifth of the total U.S. workforce.

Certainly, that’s a lot of people. But a closer look at all the historical data we have can help put this in some perspective.

One dubious claim is to call the current levels a “record.” The problem is the data only go back a little over two decades, which means it’s certainly possible that the rate could have been higher at several points in the past. We just don’t know.

For example, during the dot-com bubble in the late 1990s and early 2000s, the U.S. economy was strong, which created many new jobs and opportunities for workers. These are typical precursors to more people quitting their current jobs in search of better pay and benefits. Given that the rate was 2.4% in January 2001 – a month after the quits data begin – it’s not a stretch to imagine it may have been higher than the current level at some point in 2000 or earlier.

Or another time when quits may have been higher was after World War II, when the postwar American economy was booming and the economy was in great flux.

In fact, some data pre-2000 do suggest there are times when the quit rate may have been higher. The Bureau of Labor Statistics tracked the quit rate in the manufacturing sector from 1930 to 1979, when it ended its survey because the industry – which at one time made up as much as 28% of the economy – became less important.

Manufacturing workers were quitting their jobs at a monthly average rate of 6.1% in 1945, compared with the 2.3% recorded for the sector in November 2021.

Since about a third of the U.S. workforce had manufacturing jobs in the late 1940s, this suggests the quit rate was higher back then.

Putting quits into perspective

A lot of stories have also looked at the absolute number of workers who quit their jobs, such as the 4.5 million who quit in November – on a seasonally adjusted basis.

If quits for December 2021 are similar to those for November, I expect about 47 million people will have voluntarily left their jobs in all of 2021. That would mean about 33% of the total nonfarm workforce quit jobs last year.

Again, that seems like a lot. But a huge swath of the labor force does this every year. In 2019, for example, about 28% of the U.S. workforce quit.

So is quitting higher than normal? For sure. But off the charts enough to earn the moniker of “great”? I don’t think so.

Not all industries are seeing a wave of quitting

Workers also aren’t quitting in droves across all sectors of the economy. While quits are higher than usual in most industries, a few sectors are responsible for most of the turnover.

The highest quit rate is in accommodation and food services. About 6.9% of people working in hotels, motels, restaurants and bars gave notice in November. To be sure, that’s the highest rate seen since 2000. But voluntary turnover in this sector is usually on the high side – given the nature of the work – and has been above 5% many times throughout the past two decades.

November’s second-highest quit rate, at 4.4%, was in retail trade, which includes workers in stores and shops. Combined, these two relatively low-wage industries accounted for one third of all people who quit that month.

On the other hand, the quit rates for construction, information, finance and insurance and real estate are relatively low and have been higher in the past 21 years.

We can also see from the data that young people make up the biggest share of people switching jobs. Data from ADP, one of the largest payroll processors, breaks down turnover by age. But unlike the JOLTS data, ADP doesn’t learn why someone is no longer working at a company – whether they quit, got fired or something else – so it can track only total turnover.

ADP’s most recent data show high turnover is concentrated among 16-to-24-year-olds, who have a turnover rate almost three times the national average.

The high turnover for young workers is not surprising, in my view, because COVID-19 restrictions have canceled many nonwage benefits like after-work socializing and company parties. For younger workers new to the labor force, these types of activities are important in developing company belonging and loyalty. Without them, there are fewer ties binding these workers to a company.

Reducing the quit rate

Nonetheless, just because the quit rate isn’t at a record level doesn’t mean there isn’t too much turnover in the labor market. But this situation appears to predate the pandemic.

High annual quit rates mean many workers are not satisfied with their job’s pay, benefits or working conditions. Hiring and training workers is expensive. Meanwhile, workers often find that searching for new jobs and switching jobs is physically and emotionally difficult.

Research shows employers have various ways to minimize turnover, such as by giving workers a sense of purpose, letting them work in self-directed teams and providing better benefits.

Workers who are thinking about quitting should ideally find another job beforehand. They’ll have a much higher chance of success moving from one job to another than trying to jump from unemployment to work.

But the next time you hear about the “Great Resignation,” understand it isn’t quite as great as it seems, since large numbers of U.S. workers have been quitting for years.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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