Summary: US quit rate slips in July; bond yields almost unchanged, expectations of higher rates firm; “no signs” of cooling labour market, Fed “needs to be more aggressive”; quits, separations down, openings up.
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 in the first half of 2022.
Figures released as part of the most recent Job Openings and Labor Turnover Survey (JOLTS) report show the quit rate declined in July. 2.7% of the non-farm workforce left their jobs voluntarily, down from 2.8% in June, the result of 74,000 fewer quits and an additional 528,000 people employed.
US Treasury yields finished the day without much change. By the close of business, the 2-year Treasury bond yield had returned to its starting point at 3.43%, the 10-year yield had crept up 1bp to 3.11% while the 30-year yield finished 2bps lower at 3.22%.
In terms of US Fed policy, expectations of higher federal funds rates over the next 12 months firmed. At the close of business, September contracts implied an effective federal funds rate of 2.54%, 21bps higher than the current spot rate while November contracts implied a rate of 3.46%. September 2023 futures contracts implied 3.79%, 146bps above the spot rate.
“The data suggests there are no signs yet of a cooling in the labour market with the inference the Fed needs to be more aggressive,” said NAB Director of Economics Tapas Strickland. “Note the number of people unemployed in the US is 5.67 million, suggesting even if layoffs rise, there is ample opportunity to get re-employment elsewhere.”
The fall in total quits was led by 73,000 fewer resignations in the “Health care and social assistance” sector while the “Professional and business services” sector experienced the single largest rise, increasing by 62,000. Overall, the total number of quits for the month fell from June’s revised figure of 4.253 million to 4.179 million.