About a week ago, we posted our thoughts on the labor market - namely, that it is finally in some type of a recovery stage. We wanted to follow up because we wanted to expand on our comments about the quit rate, and talk a bit about why we think it's important: it boils down to correcting one of the silliest quotes that abounds on the internet.
Quit Rates and Another, Completely Different Idea
I apologize for forgetting the economist who first gave us the idea, but a concept that really resonates with us on the economy is (roughly, remember I'm paraphrasing a forgotten phrase): "No one can know the full state of the economy, they can only have a limited snapshot".
Indeed - it is the sum of these snapshots, perhaps after taking the difference with other snapshots, which is what we mean by the 'economy'. It's a dirty, granular thing which describes the total state of employment, spending, and so many other things - it affects individual decisions on purchasing and hiring, sure, but any individual decision may go against the prevailing economic trend.
That is, the plural of anecdotes is data. Or, at least, eventually (and with glee we note that the original quote actually was in this positive form - see Fred Shapiro quoting himself in his younger days teaching at Stanford). So let's take a large sum of anecdotes - Americans who felt secure enough to quit jobs versus people who were laid off or non-voluntarily left a job for other reasons:
Nonfarm quits from BLS, nonfarm layoffs and discharges as well.
Recessions, Depressions, Recoveries
The first two thirds of a Ronald Reagan punchline once went "A recession is when your neighbor loses his job. A depression is when you lose yours."
While we would never rely solely on quit rates versus layoffs for a complete picture of the employment market, a market in which people feel comfortable quitting - indeed, a market in which we've already shown has a bit of wage pressure building up - is a thawing labor market indeed.
So, following along President Reagan's quote, we can say: an economy where more of your neighbors are quitting than being laid off is a recovery.
Okay, maybe we'd need a speechwriter in a run for political office. But, let's hear your un-sourced anecdotes: are you more confident in the job market? What are you seeing out there?
