Business

More workers quit their jobs, and that's good news for the economy

The economy responds to consumer fear and confidence, and confident workers quitting their jobs in search of something better signal to economists that things are looking up.

Adam Lau/AP

Job seekers line up to speak with potential employers at a job fair in Los Angeles June 3. As one sign of an improving economy, more people now are quitting their jobs in search of something better.

By Husna Haq Correspondent

June 09, 2010, 5:04 p.m. ET

Sometimes quitting is good.

In a sharp reversal from the previous 15 months, more people quit their jobs in the past three months than were laid off. And that’s a good sign, economists say.

“In general, that’s a sign of better economic times,” says Donald Siegel, dean of the school of business at the University at Albany, part of the State University of New York. “I interpret it as a sign of an improving job market … when people feel confident enough to quit their jobs."

Nearly 2 million people quit their jobs in April, the highest number of resignations in more than a year, according to the Bureau of Labor Statistics (BLS). By contrast, 1.75 million people were laid off in April, the fewest since January 2007.

February, March, and April figures mark the first time since late 2008 that more people quit their jobs than were laid off.

Employers cut more than 8 million jobs in 2008 and 2009, sending the unemployment rate to a 26-year high of 10.1 percent. As unemployment spiked, the number of people quitting plummeted to 1.72 million in September 2009, the lowest number the government has seen since it started tracking the number in 2000.

Resignations generally outnumber layoffs in a healthy economy. During recessions, people are hesitant to quit because jobs are scarce, says John Wohlford, an economist with the BLS.

“Especially in a recession, people tend to hang on to jobs,” says Mr. Wohlford. “If people start quitting, we can interpret that as workers getting more confident in their ability to get jobs…. Generally speaking, when the labor market recovers and employment goes up, quits also go up.”

Siegel says he expects to see more people leaving their jobs now that the job market is slowly recovering.

“One reason is that there’s a backlog of quits,” he says. “People wanted to quit in 2008, during the height of the recession, but didn’t because they were worried they wouldn’t get another job. They waited until the optimal time to quit – when the job market improves.”

Many of those workers have also been subject to employers’ belt-tightening measures: wage freezes, furloughs, and pay cuts. Those workers may start to quit because they’re dissatisfied with the compensation at their current jobs, Siegel adds.

Low morale may also be triggering people to quit. During the recession, companies squeezed more out of their employees as layoffs forced fewer workers to do more work. Those who survived layoffs are often overworked and may be among the first to quit as the job market shows improvement.

But are there enough jobs to accommodate the millions now voluntarily leaving their jobs?

Not yet, figures suggest.

Although job openings are up, hiring has remained flat at about 3.3 percent since the recession began.

And the job market seems to be recovering in fits and starts. April was a stellar month for job seekers: Private employers added 218,000 jobs. But May saw only 41,000 new jobs in the private sector.

Still, the economy responds to consumer fear and confidence, and confident workers quitting their jobs signal to economists that things are looking up.

"One thing we do know from over a century’s worth of evidence is that quits rise and layoffs fall as job market improves," says Siegel. "So absolutely, this is a good sign."

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