Workers in the United States are still enjoying their strongest bargaining position in decades, but fewer of them told their bosses “I quit” as 2021 drew to a close.
Some 4.3 million Americans voluntarily quit their jobs in December – a decrease of 161,000 from November’s record high reading, the US Department of Labor said on Tuesday.
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The quits rate signals how confident Americans feel about their job prospects. And there are certainly loads of positions to choose from. The number of job openings stood at 10.9 million on the last business day of December – slightly higher than November’s reading and still within striking distance of July’s all-time high.
Before the coronavirus pandemic struck in 2020, job openings in the US hovered around 7 million. But demand for workers surged last year as the economy cast off COVID-19 restrictions, enabling consumers flush with savings to unleash pent-up demand.
In July, a record 11.09 million jobs were going begging in the US. Compounding the problem: the pool of ready and willing workers has still not recaptured its pre-pandemic strength.
Myriad factors are believed to be contributing to the ongoing worker shortage in the world’s largest economy, from baby boomers opting to take early retirement, to fear of contracting COVID-19 and people opting to start their own businesses rather than work for someone else.
With so many job openings and so few job seekers to fill them, workers are demanding better deals from employers and voting with their feet if they don’t get them – a phenomenon that’s been dubbed the Great Resignation.
To lure scarce job seekers, businesses have been sweetening compensation packages with signing bonuses, fatter paycheques and better benefits.
The raise has been long overdue, especially for low-income workers. But those higher labour costs, combined with higher raw material costs, are feeding inflation.
Consumer price inflation is running at its highest level since 1982.
With price pressures running red hot, the US Federal Reserve is pivoting away from keeping interest rates low to boost jobs creation and towards raising interest rates to get inflation under control.
Last week, Fed Chairman Jerome Powell confirmed that the US central bank will likely start raising interest rates in March.
But higher interest rates, while inflation cooling, also suppress economic growth, underscoring the balancing act the Fed is trying to pull off.
If inflation starts to spiral too far too fast, expectations of higher prices on the horizon can become unhinged and force the Fed to raise rates abruptly and possibly derail the recovery.
What the Fed is aiming to do is to raise interest rates just enough to tamp down inflation while keeping the economy on a growth trajectory.
Last year, the US economy grew 5.7 percent – the strongest reading since 1984. But headwinds are pointing to a downshift this year.
A few factors were converging at the closer of 2021 to pump the brakes on growth. Inflation and the highly infectious Omicron variant of the coronavirus took some of the edge off of retail spending, while ongoing supply-chain snarls took a bite out of factory activity.
Omicron infections also triggered a wave of workers calling in sick in January, which will drag on growth.