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Are Quitters Overconfident? – Real Time Economics – WSJ

October 18, 2012 Leave a comment Go to comments

Are Quitters Overconfident? – Real Time Economics – WSJ.

U.S. labor markets are a mess. Yet a growing number of workers think their job prospects are pretty good.

That’s one way to read the details of Wednesday’s job openings and labor turnover survey, or Jolts, report.

According to the report, the weakness in the payrolls number — which is the net change between job gains and losses — isn’t because businesses became uninterested in hiring. The number of new hires each month has hovered around 4.3 million since February. Rather, job separations — layoffs, quits, and other discharges — have been on the rise for much of this year.

It must be businesses are cutting staff in reaction to weak demand and uncertainty, right?

Not really. Much of the increase in separations is from workers voluntarily leaving their old jobs. People quitting their jobs now account for just over half of all job separations. (In addition to quits, layoffs and firings, job separations include a much smaller number of retirements, deaths and disability.)

To be sure, the turnover in the labor markets remains quite low compared to the activity before the Great Recession. For instance, current pace of quits is about half the rate seen in the mid-2000s.

But the increase in resignation letters suggests workers see more reasons to be hopeful about job prospects than is indicated by the lackluster job reports.

This hope also shows up in consumer surveys. Although the number is volatile, the percentage of consumers who told the Conference Board that they think jobs are “plentiful” has been consistently higher this year than in the past three years. The sentiment survey done by Reuters and the University of Michigan found more consumers reported hearing news about job gains in September.

It could be that consumers on the ground see trends that haven’t yet shown up in the data. But these are other reasons to think consumers are indulging in wishful thinking.

First is the sluggish growth in payrolls itself.

Second are other data showing weak demand for labor. According to the Jolts report, the number of job openings was down slightly in August and has basically plateaued this year. Online help-wanted ads, as compiled by the Conference Board, were down in the third quarter.

Businesses worried about the global slowdown and fiscal problems in Washington are in no mood to go on a hiring spree. Consumer sentiment about jobs is getting ahead of itself. When those new jobs don’t appear, consumer economic confidence could take a quick and perhaps severe turn lower.


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