Jan 5, 2022 - Economy & Business

Workers still have all the power

Data: Bureau of Labor Statistics via FRED, Axios calculations; Chart: Danielle Alberti/Axios

Sometimes companies fire workers. Other times workers fire companies — and that's what happened to a stunning degree in 2021.

Driving the news: Government data published Tuesday showed that a record-high 4.5 million Americans quit their jobs in November.

  • The flip side of that is that employers were not firing people. Only 1.37 million workers were laid off or otherwise discharged, well below levels in the strong pre-pandemic economy.

Why it matters: Right now, employers are loath to dismiss their workers, knowing how hard it will be to replace them. That tilts the job market toward labor.

A different way to capture who has the power in the job market is to look at the ratio of people who quit their job to those who were discharged involuntarily. Aaron Sojourner, a labor economist at the University of Minnesota, calls this the "labor leverage ratio."

  • This ratio hit an extraordinary 3.31 in November, higher than it has been in the two decades of government data. Translation: More than three times as many workers quit their job as were fired.

The big picture: Even in previous strong job markets, this measure never reached anywhere close to these levels. It had only exceeded 2 for three months in early 2019. In the booming job market of December 2000, it was a mere 1.43.

  • "I like building the measure around job separations, a high-stakes, cleanly-measured concept," Sojourner tells Axios. "When workers' outside options improve, quits rise. When employers' improve, discharges rise. When workers' improve faster than employers', the ratio rises."

The bottom line: The Great Resignation is real and ongoing — and the flip side is employers doing everything they can to hold on to their workers.

Go deeper: CEOs join the Great Resignation

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