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Economic Impact: The number of people quitting their jobs is at near-record levels
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Economic Impact: The number of people quitting their jobs is at near-record levels

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As we celebrate our second Labor Day in a pandemic, there are still many unknowns about when employment will return to pre-COVID levels.

Although infections continue to rise in many states, some businesses are reopening and consumers are spending.

The pandemic still influences the labor market even though we are in economic recovery. In this environment, COVID hindrances are creating a hot labor market.

Not only are employers hiring more people because of increased demand for their goods and services, but they are also experiencing an elevated rate of workers quitting as they leave for alternative opportunities or to stay at home due to COVID concerns.

It’s not unusual for the number of people quitting their jobs to decline during a recession because of the uncertainty around how long the downturn will last and how it will affect the hiring plans of businesses.

The quits rate typically increases only gradually after a recession ends. But that’s not what happened after the COVID recession ended in April 2020.

According to the Job Openings and Labor Turnover Survey compiled by the Bureau of Labor Statistics, the quits rate fell to 1.6% of total employment in April 2020 and then rose to a record 2.8% or 4.0 million people in April 2021.

The quits rate fell slightly in June, the latest available, to 2.7%, which represents 3.9 million workers.

Quits rate isn’t available on the state level, just by census region. In the South, including Virginia, the rate was 3.0% in June.

In addition to the quits rate, COVID affects labor force participation.

Despite the strong demand for workers, the participation rate fell from 63.3% in February 2020 before COVID to a low of 60.2% in April 2020. It has climbed back to only 61.7% in August.

Some analysts question whether participation rates will get back to pre-COVID levels because of the number of people who have taken early retirement or stayed out of the workforce for fear of contracting the virus.

The participation rate should increase somewhat over the next few months as parents no longer need to stay at home as more children receive schooling in person and the extra federal unemployment insurance ends in September.

Part of the unknowns in the economic recovery is the difficulty in achieving herd immunity.

Herd immunity, which was expected to give consumers the confidence to return to pre-pandemic activities, appears to be illusive. With the more contagious delta variant, some medical experts now believe herd immunity will be reached if 80% or more of the population is either vaccinated or has antibodies from contracting COVID.

Polling by the Kaiser Family Foundation in July found that 3 in 10 adults remain unvaccinated. This included 10% who want to “wait and see” how the vaccine works for other people and 3% who will get vaccinated “only if required.” Fourteen percent will “definitely not” get a vaccine.

According to the Centers for Disease Control and Prevention, 52.4% of the U.S. population were fully vaccinated at the end of August.

Christine Chmura is CEO and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or chris.chmura@chmuraecon.com.

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