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Will the Great Resignation trend end soon?

Nik Martin
October 22, 2022

After COVID peaked, millions of Americans quit their jobs to take advantage of a tight labor market. But with many big firms now announcing layoffs as the US economy slows, could resigners' remorse be next?

A toy holds up a sign saying "Looking for a job"
The Great Resignation is the term coined to describe the mass movement of workers to better, more flexible jobsImage: PantherMedia/picture alliance

The coronavirus pandemic caused many Americans to rethink their life goals and career ambitions, prompting millions to quit unfulfilling jobs. Some reports suggested they either left the workforce altogether — maybe living on thin air — started meaningful businesses or merely survived on part-time work.

In reality, most Americans are a lot more driven and pragmatic than these media commentators give them credit for. The COVID health scare was temporary and life quickly returned to normal. At the same time, inflation soared to a four-decade high and given the indebtedness of the average US household ($96,371), most people still needed to earn a crust — indeed a much bigger one.

Tens of millions quit but not for idealistic reasons

Many economists now agree that the Great Resignation was more of a Great Reshuffle than a eureka moment by starry-eyed workers. The man who last year coined the Great Resignation term told DW that his forecast was often misunderstood.

"A lot of people heard me say everyone's going to leave the job market, and that's not what I was saying at all," said Anthony Klotz, associate professor of management at the London-based UCL School of Management. "I predicted an increase in resignations and it stands to reason that the vast majority of them were going into other jobs."

The quit working narrative took on a life of its own, said Matt Darling, an employment policy fellow at the Niskanen Center think tank.

"You can watch viral TikTok videos about people quitting and assume that people are not working as much. But almost the exact opposite is true, the labor market is so tight ... that there are not that many people left to hire," he told DW.

Competition for new staff in the US

How the Great Resignation unfolded

From June 2021 until now, as the US economy reopened following the COVID pandemic, more than 4 million Americans quit their jobs every month, according to statistics from the US Bureau of Labor. 

A survey by pollsters Marist for NPR/PBS NewsHour found that nearly four in ten US workers have changed jobs since 2020. Due to the intense competition for talent, many of them walked into higher-paying roles with better benefits.

A study by the Pew Research Center found that 60% of workers saw an increase in real earnings. The figure was much lower (47%) for those who stayed in their existing job. Other data detailed how workers moved industries, leaving some sectors like hospitality, education and retail bereft of skilled labor, while almost all sectors have struggled to attract enough new hires.

Darling said the only category of workers where employment levels have fallen is the over 70s, which you would hope was due to retirement but may be to avoid the higher risk of severe outcomes from COVID infection.

Flexible working demanded

The shortage of talent has given workers the upper hand in job negotiations and a report published by online employment marketplace ZipRecruit this month showed they are demanding more flexible employment. Nearly two out of three US job seekers now prefer full remote work over hybrid and on-site positions, and would even consider a pay cut to work at home.

Commuting costs and the desire to work from anywhere are the leading reasons cited. The report showed that women and minorities stand to benefit the most from expanding remote work opportunities.

As economy slows, will the quitting cease?

But as the US economy begins to slow, partly as a result of stubbornly high inflation — 8.2% year on year in September —  how quickly could workers lose their advantage? Tight labor markets tend to be short-lived, appearing at the end of an economic boom.

Dozens of startups and tech giants, including this week Microsoft and Intel, have already announced layoffs and the trend appears to be spreading to other sectors, including automotive and health care. The number of advertised job vacancies fell by a million in a month in August.

While the rate of resignations is still high, it has plateaued, which Klotz said may not only be due to unemployment fears among workers but because employers have redesigned working practices to stop them from quitting in their droves.

"A number of organizations say the silver lining of the pandemic is that it gave us an opportunity to reinvent work, through remote working, alternative schedules and so on." 

A hamburger restaurant advertises it is hiring for all positions on August 23, 2022 in Woodstock, Georgia, USA
Post-COVID, food and beverage firms and other retailers have struggled to recruit enough staffImage: Robin Rayne/ZUMAPRESS/picture alliance

Firms face resistance over 'return to office' orders

But while those more innovative  firms noticed that a pre-pandemic hustle culture had left their workers burned out, other companies are "looking forward to going back to the way things were in 2019." Klotz said they can expect "a lot of resistance from workers."

Although US inflation has been stoked mostly by soaring fuel, food and accommodation costs, rapid wage growth has exacerbated the problem. In August, wages increased by 8.57% compared to the same month last year, according to the US Bureau of Economic Analysis.

Klotz said the slowing economy may slow down resignations as layoffs rise but while inflation remains elevated, workers will always seek ways to stay ahead.

"As long as we keep seeing these horrible inflation numbers, employees may say 'if there's another job that pays a little bit more, I'm going to go take that.' So inflation may actually contribute to higher resignations."

Niskanen's Darling doesn't yet see the prospect of unemployment reaching crisis levels due to the ongoing demand for workers. In the wake of the 2008/9 financial crisis, the US jobless rate reached 10.6%.

He predicts that joblessness may rise from the current 3.5% to over 5% if the Federal Reserve is quick to pivot once inflation has been tamed.

"My hope is that we continue to see positive signs of inflation reducing without hitting employment very hard. But you can imagine a scenario where inflation spikes again next month, and the Fed overreacts and continues to raise rates rapidly. Then you could see unemployment spike to 6, 7 even 8%," Darling warned.

Edited by: Uwe Hessler

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