By Katie Murar
A government report issued Tuesday signaled that employers and their workers grew more confident in the health of the labor market in December — and raised the possibility that wages may be due for an increase.
The Job Openings and Labor Turnover Survey, released each month by the U.S. Labor Department to profile job trends across the country, showed the highest amount of “quits” in a decade. Employees quit at an increased rate when they are confident with the labor market, or are receiving better-paying opportunities other than their current job.
“The December JOLTS report sent an upbeat message about conditions in the labor market,” J.P.Morgan economist Daniel Silver said in an online note Tuesday.
“The combination of more job openings and more people quitting could could result in pay increases and we have seen a few other signs that wages have increased as the labor market has tightened.”
Seasonally Adjusted Quits Rate Over Past Decade
The total number of quits reached 3.1 million in December, with a rate of 2.1 percent.
The quits rate, which takes the number of quits divided by the number of employees who worked, is one of the figures most closely watched by Federal Reserve Board Chair Janet Yellen, as it is considered a good indicator of the health of the labor market.
Job openings rose to 5.6 million, the second-highest number ever in December, beating the 5.4 million figure that was expected. This figure is second only to July 2015 when openings touched 5.7 million.
The December report said job openings “rose in several industries over the year with the largest changes in health care and social assistance (+172,000) and finance and insurance (+99,000).”
Over the 12 months ending in December 2015, hires outweighed separations, defined as quits, layoffs and discharges, resulting in a net employment gain of 2.6 million, the Labor Department said.
The number of hires was 5.4 million in December, little changed from November.
The latest JOLTS report is an indication of a rapidly tightening labor market, which is putting more pressure on employers than workers, said Joel Naroff, president of Naroff Economic Advisors.
“People have been terrified of quitting for the past few years because everyone was laying off, and there was an awful lot of fear,” Naroff said. “But now the labor market has tightened to a point where its beginning to turn into a workers’ market rather than an employers market.”
Since job openings are back to pre-recession levels, Naroff thinks employees are going to have to work harder to attract new workers, and pay more to remain competitive.
“The people who are quitting are probably some of the better workers, so if companies want to retain their workforce, pay rates are going to rise,” Naroff said. “We’re going to be getting into a ‘show me the money’ workplace soon.”