There Was No Great Resignation
The media has been awash for months in stories about millions of Americans quitting their jobs in the wake of the COVID pandemic, with countless analyses arguing that workers have taken stock of their priorities and decided that the old rat race just wasn’t worth it. Alas, the distinguished economist Bart Hobijn reports, nothing unusual happened.
The record percentage of workers who are quitting their jobs, known as the “Great Resignation,” is not a shift in worker attitudes in the wake of the pandemic. Evidence on which workers are quitting suggests that it reflects the strong rebound of the demand for younger and less-educated workers. Historical data on quits in manufacturing suggest that the current wave is not unusual. Waves of job quits have occurred during all fast recoveries in the postwar period.
The labor market recovery since the depth of the COVID-19 pandemic in the spring of 2020 has been the fastest in postwar history. This historic rebound is evidenced by the steepest decline of the unemployment rate and the fastest growth in payroll employment on record (Hall and Kudlyak 2021).
At the same time, the share of workers quitting their jobs—either to take new jobs or to exit the labor force—has also hit its highest level since 2000, when the data began being collected. This recent spike in quits has been referred to as the “Great Resignation.” Some have interpreted it as a wave of resignations, driven by people reconsidering their career prospects and work-life balance, that is drastically altering the labor supply. In this Economic Letter, I provide two pieces of evidence that cast doubt on this narrative and, instead, suggest that the high rate of quits is simply a reflection of the rapid pace of overall labor market recovery.
First, I find that the increase in the quits rate is driven by young and less-educated workers in industries and occupations that were most adversely affected by the pandemic. This is also where payroll employment growth has been high recently, offsetting the job losses incurred in 2020.
Secondly, the Great Resignation is not so great after all. Historical data on the quits rate in manufacturing point to waves of quitting being common during fast recoveries when employment growth was high. Thus, it is not an anomaly, but instead fits the pattern of many past rapid recoveries.
There’s a whole lot more but that’s the upshot. Kevin Drum, who pointed me to the piece, observes, “I continue to wonder where this narrative ever came from in the first place.” He produces this graph:
The quit rate dropped precipitously at the start of the pandemic for obvious reasons: workers were being laid off by the millions and no one in their right mind wanted to enter a job market like that.
But that turned around shortly and the quit rate went back up. Critically, though, the quit rate merely rebounded to its old Great Recovery trendline. It may be that 3% is a “record” quit rate, but it’s only very slightly above trend.
He amplifies this with a second chart:
This chart shows the difference between the hire rate and the quit rate. As you can see, it’s very, very stable. The quit rate during the Great Recovery has been consistently about two percentage points below the hire rate.
Bottom line: There was never really anything to the Great Resignation theory. Quits and hires spiked and rebounded during the pandemic year of 2020 but were back to normal by the start of 2021. I’m not sure why you need anything more than this to understand what was going on.
Among the many problems with daily journalism and punditry is that they essentially force half-baked analysis based on incomplete information. It was perfectly reasonable to treat the massive economic upheaval caused by the pandemic as unique rather than an ordinary recession. And the fact that people seemed to go back to work slowly—or not to be looking for work at all—once governments gave the green light to reopening reinforced that belief.
This is compounded by the biases of the type of people who predominate in journalism and punditry, who tend to be highly educated and to view wage labor as something one would do only under coercion. (I remember, for example, some Ezra Klein podcasts arguing that it was unjust to force people to choose between mundane jobs that weren’t self-actualizing and the inability to afford the basic necessities of life.) That a suddenly-empowered proletariat was throwing off its chains while sounding a barbaric yawp was an impossible-to-resist feel-good story. And the reliance of anecdote over data—another characteristic of most daily journalism—made it really easy to tell this story over and over using specific examples.