Wage-Price Spiral Beckons As Americans Quit By The Millions

Job openings barely budged and the quit rate rose in February, closely watched data out Tuesday showed.

There were 11.266 million available jobs on the last business day of the month, only marginally fewer than the number of openings at the end of January.

Hires rose 263,000, but it wasn’t enough to make a serious dent in the gap, which remains near record wides (figure below).

That suggests very little progress on the road to labor market normalization. The labor supply-demand disparity is as intractable as it is large. Note also that the labor differential touched a new record high in the March vintage of the Conference Board’s consumer survey.

Trends in quits were virtually unchanged last month. 4.4 million Americans quit a job, and the seasonally adjusted rate ticked higher. It’s stuck near a record (figure below).

Again, that suggests the so-called “Great Resignation” rolled on last month, amid epic labor market distortions and cut-throat competition for scarce workers.

Openings in accommodation and food service fell slightly, but are still sky-high. They ticked up in leisure and hospitality more broadly. 863,000 people quite a leisure and hospitality last month, the second most ever, behind November. Layoffs remained very subdued near record lows on an absolute basis.

There are (still) around five million more job openings than people counted as unemployed (figure below).

If you want a job, you can have nearly two.

It’s not obvious these distortions are set to abate anytime soon. Despite historically elevated wage growth, pay increases aren’t keeping up with inflation.

“The overall high quit rate highlights the issue that firms are not only having to pay more to recruit new workers, but also pay more to retain the staff they have,” ING’s James Knightley said Tuesday. “In a service sector economy, the biggest cost is your workforce,” he added. “Given clear evidence of corporate pricing power, this means inflation will stay higher for longer as firms pass higher costs onto their customers.”

Of course, customers are workers when they’re not shopping. So, when they’re compelled to pay more for the items they buy when they’re not on the clock, they’re likely to ask for more money when they punch in the next day.

That, in turn, drives labor costs higher still, necessitating more price hikes, in the dreaded “spiral.”


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7 thoughts on “Wage-Price Spiral Beckons As Americans Quit By The Millions

  1. Labor supply will pick up as smaller companies dependent on cheap labor are forced to close. Think local coffee shops, charming little boutiques and such. Sadly, that will be to the benefit of the larger chain operations. Soon all of America will resemble the homogenous little shopping centers attached to every tract development around Phoenix.

  2. I haven’t looked at any national trends, but after the pandemic we probably didn’t have an explosion of karate studios, massage parlors, nail salons and trinket shops open? I assume many of those dreams have been left behind in the GFC, but theoretically that human labor is waiting to jump into low paying big box jobs that don’t offer benefits, but, there may be an issue of pent up anger attached to this? It’s possible that now that America Isn’t Great Again, there is a segment of the labor force that’s simply waiting to provide their talents after Sleeping Joe is swept away.

    These thoughts have been my own…

  3. Gosh it’s almost like having a president who’s only objective of building a wall and keeping immigrants out because “we’re full” might have something to do with these employment gaps!

  4. Last night I went into a popular restaurant in the Biltmore (Phoenix) for dinner. We were told the wait was 25 minutes (even though 70% of the tables were empty). I asked the lady why we had to wait when the tables were all empty (suspecting that the tables were reserved), she said “we only have one cook and two waiters”. Where did all the servers go?

NEWSROOM crewneck & prints