Quits

What Are Quits?

"Quits" refer to voluntary separations from employment initiated by the employee. As a key metric within labor economics and employment statistics, the number of quits is typically interpreted as a measure of worker confidence in the labor market. When workers voluntarily leave their jobs, it often signifies that they have found better employment opportunities, are seeking improved wages, or are pursuing different career paths. This contrasts with involuntary separations, such as layoffs or discharges.

The U.S. Bureau of Labor Statistics (BLS) collects and publishes data on quits as part of its Job Openings and Labor Turnover Survey (JOLTS). This monthly survey provides crucial insights into the dynamics of the American labor market, helping economists and policymakers gauge the overall economic health and direction of the economy. High quit rates can indicate a robust economy with ample job openings, empowering workers to seek more favorable conditions.

History and Origin

The collection of comprehensive data on labor turnover, including quits, gained significant prominence with the establishment of the Job Openings and Labor Turnover Survey (JOLTS) by the U.S. Bureau of Labor Statistics (BLS). The BLS began collecting JOLTS data in December 2000, providing consistent monthly estimates of job openings, hires, and separations, which include quits, layoffs and discharges, and other separations. The JOLTS program aimed to offer a more granular view of labor market dynamics beyond just the unemployment rate.⁷

A notable period that highlighted the significance of the quits rate was the "Great Resignation," beginning in early 2021 during the COVID-19 pandemic. During this time, the number of employees voluntarily leaving their jobs reached unprecedented levels. The quits rate hit a record 3.0% in November and December 2021.⁵, ⁶ While initially interpreted by some as a permanent shift in worker attitudes and a desire to exit the workforce, research from the Federal Reserve Bank of San Francisco suggested that these high rates were largely a reflection of the rapid pace of overall labor market recovery and strong demand for workers, particularly among younger and less-educated individuals in pandemic-affected industries.⁴

Key Takeaways

• Voluntary Separation: Quits represent employees voluntarily leaving their jobs, often for better opportunities, rather than being involuntarily separated.
• Economic Barometer: A high quits rate generally signals a strong labor market and high worker confidence, as individuals feel secure in finding new employment.
• JOLTS Data: The U.S. Bureau of Labor Statistics (BLS) measures quits monthly as part of its Job Openings and Labor Turnover Survey (JOLTS).
• Wage Pressure Indicator: Elevated quit rates can contribute to wage growth as employers compete to attract and retain talent.
• Reflects Worker Sentiment: The trend in quits data can reveal shifts in overall worker sentiment and their perceived job mobility within the economy.

Formula and Calculation

The quits rate is calculated by dividing the number of quits for a given period by the total number of employees, then multiplying by 100 to express it as a percentage.

The formula is:

Where:

• Number of Quits: The count of employees who voluntarily left their jobs during the specified period.
• Total Employment: The total number of employees on nonfarm payrolls for the same period.

For example, if 3 million people quit their jobs in a month and the total nonfarm employment is 150 million, the quits rate would be calculated as:
(\left( \frac{3,000,000}{150,000,000} \right) \times 100 = 2%)

This calculation helps analysts understand the proportion of the workforce voluntarily changing jobs, providing insight into labor market dynamism and employee confidence.

Interpreting the Quits Rate

Interpreting the quits rate involves understanding its implications for the broader labor market and the economy. A rising quits rate typically suggests that workers are confident in their ability to find new or better employment, signaling a tightening labor market. This often correlates with increasing job openings and potentially higher wage growth as employers compete for talent. In such an environment, employees perceive more opportunities for career advancement, improved working conditions, or better compensation.

Conversely, a falling quits rate can indicate caution among workers, suggesting that they may be less confident in their job prospects elsewhere. This often occurs during economic slowdowns or recessions, where job security becomes a greater concern. A low quits rate can also point to a less dynamic labor market, where workers have fewer incentives or opportunities to switch jobs. Analysts often look at the quits rate alongside other economic indicators, such as the unemployment rate and hires, to form a comprehensive view of economic health.

Hypothetical Example

Consider the hypothetical company "TechSolutions Inc." In January, TechSolutions, a company with 5,000 employees, saw 100 employees voluntarily leave their positions. These individuals either secured new jobs with higher salaries, sought better work-life balance, or retired.

To calculate the quits rate for TechSolutions in January:

1. Identify the Number of Quits: 100 employees.
2. Identify Total Employment: 5,000 employees.
3. Apply the formula: $$\text{Quits Rate} = \left( \frac{100}{5,000} \right) \times 100 = 0.02 \times 100 = 2\%$$

So, TechSolutions Inc. had a 2% quits rate in January. If the industry average for similar tech companies was 1.5%, TechSolutions' higher rate might prompt management to investigate underlying factors such as compensation, company culture, or opportunities for human capital development. This internal analysis of turnover helps the company understand employee sentiment and retention challenges.

Practical Applications

Quits data has several practical applications across various financial and economic sectors:

• Labor Market Analysis: Economists and policy makers closely monitor the quits rate as a key indicator of labor market dynamism and worker confidence. A rising rate often precedes or coincides with periods of strong economic growth, as workers are more willing to leave jobs when they perceive better opportunities.
• Monetary Policy Decisions: The Federal Reserve, when assessing the tightness of the labor market, considers the quits rate. A high rate, signaling a robust job market and potential wage growth, can influence decisions regarding interest rates to manage inflation.
• Business Strategy and Human Resources: Companies analyze quits data, both their own and industry-wide, to understand employee retention, compensation competitiveness, and workplace satisfaction. Industries with consistently high quit rates, such as hospitality and retail, often face ongoing challenges in recruiting and retaining staff, necessitating strategic adjustments to benefits or work environment.³
• Investment Analysis: Investors and analysts use quits data to assess the health of specific industries or the broader economy. Strong quits data can suggest robust consumer spending and corporate profits, while a decline might signal an impending economic slowdown or a shift in business cycles.
• Understanding Economic Shocks: During and after significant economic events, such as the COVID-19 pandemic, shifts in the quits rate provide insights into how workers are responding to changes in economic conditions, health concerns, and evolving work preferences, including a greater desire for work-life balance or remote options. The concept of "Long Social Distancing" and its impact on the workforce, for example, illustrates how broad societal shifts can influence labor force participation and voluntary departures. NBER Working Paper 30568

Limitations and Criticisms

While the quits rate is a valuable economic indicator, it has certain limitations. One primary criticism is that the data, as collected by the BLS JOLTS program, only captures voluntary separations and does not explicitly detail the underlying reasons for an employee's decision to quit. For instance, a high quits rate might suggest strong worker confidence, but it doesn't distinguish between someone leaving for a higher-paying job versus someone exiting the labor force entirely due to care responsibilities or early retirement. This lack of granular "why" can sometimes lead to misinterpretations.

Furthermore, the aggregate national quits rate may mask significant variations across different industries, demographic groups, or geographic regions. A low national rate could conceal high turnover in specific sectors, while a high national rate might not reflect stagnant conditions in others. For example, while the "Great Resignation" saw a surge in overall quits, the motivations varied, including low pay, lack of advancement, and toxic work environments, which are not directly discernible from the raw quits numbers.² Additionally, data collection methods and seasonal adjustments, while robust, can still lead to revisions, influencing short-term analysis.

Quits vs. Layoffs

"Quits" and "Layoffs" both represent types of employment separations, but they differ fundamentally in who initiates the separation:

The key point of confusion often arises because both result in a reduction in employment from the employer's perspective. However, from the worker's perspective and as an economic indicator, they signal very different dynamics. A high quits rate suggests a "hot" job market where workers feel empowered, while a high rate of layoffs indicates a cooling or contracting market where employers are shedding staff.

FAQs

What does a high quits rate mean for the economy?

A high quits rate generally indicates a strong economy and a healthy labor market. It suggests that workers are confident in their ability to find new or better jobs, leading them to voluntarily leave their current positions. This often implies ample job openings and potentially rising wages as employers compete for talent.

Is the quits rate part of the unemployment rate?

No, the quits rate is a separate statistic from the unemployment rate. The unemployment rate measures the percentage of the labor force that is jobless but actively seeking employment. The quits rate, measured by the JOLTS survey, focuses on the number of people who voluntarily leave their jobs. While both reflect labor market conditions, they measure different aspects.

How often is quits data released?

The U.S. Bureau of Labor Statistics (BLS) releases data on quits monthly as part of its Job Openings and Labor Turnover Survey (JOLTS). This release provides insights into the number and rate of quits for the previous month across various industries.¹

Why do companies care about the quits rate?

Companies care about the quits rate because it directly impacts their turnover costs, productivity, and ability to retain human capital. High quits rates can lead to increased recruitment and training expenses, loss of institutional knowledge, and potential disruptions to operations. Monitoring this rate helps businesses assess employee satisfaction, compensation competitiveness, and the effectiveness of their retention strategies.