Summary: US quit rate steady at 2.2% in December; short-term US Treasury yields up, longer-term yields down; expectations of Fed rate cuts in 2024 soften; fewer quits, separations, more openings.
The number of US employees who quit their jobs as a percentage of total employment increased slowly but steadily after the GFC. It peaked in March 2019 and then tracked sideways until virus containment measures were introduced in March 2020. The quit rate then plummeted as alternative employment opportunities rapidly dried up. Following the easing of US pandemic restrictions, it proceeded to recover back to its pre-pandemic rate in the third quarter of 2020 and trended higher through 2021 before easing through 2022 and 2023.
Figures released as part of the latest Job Openings and Labor Turnover Survey (JOLTS) report show the quit rate remained steady in December. 2.2% of the non-farm workforce left their jobs voluntarily, unchanged from November after rounding. Quits in the month fell by 132,000 while an additional 216,000 people were employed in non-farm sectors.
The figures came out at about the same time as the latest reading of The Conference Board’s consumer confidence index and short-term US Treasury yields rose while longer-term yields fell. By the close of business, the 2-year Treasury bond yield had gained 5bps to 4.36%, the 10-year yield had lost 2bps to 4.05% while the 30-year yield finished 4bps lower at 4.27%.
In terms of US Fed policy, expectations of a lower federal funds rate in the next 12 months softened, albeit with several cuts still factored in. At the close of business, contracts implied the effective federal funds rate would average 5.325% in February, essentially in line with the current spot rate, 5.29% in March and 5.225% in April. January 2025 contracts implied 4.01%, 132bps less than the current rate.
The fall in total quits was led by 71,000 fewer resignations in the “Health care and social assistance” sector while the “Wholesale trade” sector experienced the largest gain, rising by 63,000. Overall, the total number of quits for the month decreased from November’s revised figure of 3.524 million to 3.392 million.
Total vacancies at the end of December increased by 101,000, or 1.1%, from November’s revised figure of 8.925 million to 9.026 million. The rise was driven by a 239,000 gain in the “Professional and business services” sector while the “Accommodation and food services” sector experienced the single largest decrease, falling by 121,000. Overall, 9 out of 18 sectors experienced more job openings than in the previous month.
Total separations decreased by 36,000, or 0.7%, from November’s revised figure of 5.401 million to 5.365 million. The fall was led by the “Health care and social assistance” sector where there were 91,000 fewer separations. Separations decreased in 10 of the 18 sectors.
The “quit” rate time series produced by the JOLTS report is a leading indicator of US hourly pay. As wages account for around 55% of a product’s or service’s price in the US, wage inflation and overall inflation rates tend to be closely related. Former Federal Reserve chief and current Treasury Secretary Janet Yellen was known to pay close attention to it.