Quits Rate
What Is the Quits Rate?
An economic indicator from the Job Openings and Labor Turnover Survey (JOLTS) that measures the percentage of total employment that voluntarily leaves their jobs, serving as a key barometer of worker confidence.
The quits rate is a critical economic metric derived from the Job Openings and Labor Turnover Survey (JOLTS), which is released monthly by the U.S. Bureau of Labor Statistics (BLS). It specifically tracks "voluntary separations"—instances where employees choose to leave their jobs of their own accord, as opposed to being laid off, fired, or retiring. The rate is calculated by dividing the total number of quits in a given month by the total non-farm employment for that same month, then multiplying by 100 to get a percentage. Because it measures voluntary departures, economists and policymakers view the quits rate as a powerful proxy for worker leverage and sentiment. When the economy is robust and jobs are plentiful, workers feel confident enough to quit their current roles in search of higher pay, better benefits, or improved working conditions. Conversely, during economic downturns or periods of uncertainty, workers tend to "hunker down" and hold onto their current positions, causing the quits rate to fall. Therefore, a high quits rate is often a sign of a healthy, dynamic labor market, while a low rate signals stagnation or fear.
Key Takeaways
- A high quits rate suggests workers are confident in the labor market and their ability to find better opportunities.
- A low quits rate indicates uncertainty or fear about job security.
- It is closely watched by the Federal Reserve as a leading indicator of wage inflation.
- Often rises during economic expansions and falls during recessions.
- Can vary significantly by industry (e.g., higher in retail/hospitality than manufacturing).
How the Quits Rate Works as an Indicator
The quits rate functions as a unique economic signal that acts as a "lagging" indicator of overall economic health but a "leading" indicator of wage pressure and inflation. Labor Market Tightness: A rising quits rate is a clear signal of a "tight" labor market, meaning the demand for workers exceeds the available supply. When employees are quitting in large numbers, employers are forced to compete for talent. To attract new hires and retain existing staff, they must raise wages and improve benefits. Consequently, a sustained high quits rate is often a precursor to broader wage inflation, as companies pass these higher labor costs on to consumers in the form of higher prices. Worker Confidence: The decision to quit a job without necessarily having another one lined up (or the confidence that one can be found quickly) reflects deep optimism about the economy. Historically, the quits rate peaks during the height of economic expansions and plunges at the very onset of recessions, often faster than the unemployment rate rises. Federal Reserve Policy: The Federal Reserve monitors the quits rate closely when setting interest rates. If the rate is too high, it suggests the economy is overheating and wage-price spirals are a risk, potentially prompting rate hikes. If it is too low, it suggests labor market weakness, potentially prompting rate cuts.
Interpreting High vs. Low Rates
Understanding what different levels signal:
| Level | Market Sentiment | Wage Implication | Economic Context |
|---|---|---|---|
| High (e.g., > 2.5%) | Very Confident | Strong upward pressure | Boom / Overheating |
| Moderate (e.g., 2.0-2.4%) | Stable / Optimistic | Steady growth | Healthy Expansion |
| Low (e.g., < 1.8%) | Fearful / Cautious | Stagnant or falling | Recession / Slowdown |
Relationship to Wage Growth (Phillips Curve)
There is a strong correlation between the quits rate and wage growth, often linked to the Phillips Curve concept (the inverse relationship between unemployment and inflation). When the quits rate rises, employers face higher turnover costs. To stem the flow of departing workers, they often increase compensation for existing employees and offer higher starting salaries for new hires. This "wage-price spiral" can contribute to broader consumer price inflation (CPI) if companies raise prices to cover higher labor costs. Conversely, a low quits rate suggests workers have little bargaining power, leading to stagnant wage growth and potentially lower inflation.
Real-World Example: The Great Resignation
Following the COVID-19 pandemic, the U.S. experienced a phenomenon dubbed "The Great Resignation." In late 2021 and early 2022, the quits rate soared to record highs, peaking at 3.0% (over 4.5 million workers quitting per month). This surge was driven by a combination of factors: 1. Pent-up demand from workers who stayed put during 2020. 2. A shift in priorities (remote work, work-life balance). 3. Rapid wage increases in lower-paying sectors like hospitality and retail. The result was a historically tight labor market that forced employers to raise wages at the fastest pace in decades, contributing significantly to the inflation spike of 2022-2023. By December 2025, the rate had normalized to around 2.0%, reflecting a more balanced market.
Advantages of Using Quits Rate
1. **Sentiment Gauge:** It directly reflects how workers *feel* about their prospects, which consumer confidence surveys may miss. 2. **Granularity:** JOLTS data breaks down quits by industry (e.g., Professional Services vs. Leisure & Hospitality), allowing for targeted analysis. 3. **Predictive Power:** Changes in the quits rate often precede changes in the broader unemployment rate.
Disadvantages and Limitations
1. **Lag Time:** JOLTS data is released with a one-month lag (e.g., December data released in February), making it less timely than the monthly jobs report (NFP). 2. **Voluntary Only:** It does not capture involuntary job losses (layoffs/discharges), which are tracked separately. 3. **Survey Size:** The sample size is smaller than the household survey used for the unemployment rate, potentially leading to higher volatility in the data.
Common Beginner Mistakes
Avoid these errors when analyzing the quits rate:
- Confusing "quits" with "layoffs" (they move in opposite directions).
- Assuming a high quits rate is bad for the economy (it actually signals health/mobility, though it raises costs).
- Ignoring industry-specific trends (retail always has a higher rate than government jobs).
FAQs
Generally, a high quits rate is considered a positive sign for the economy because it indicates that workers are confident enough to leave their current jobs for better opportunities. However, if it remains too high for too long, it can lead to labor shortages and wage inflation, which can be negative for businesses and price stability.
Typically, lower-wage industries with high turnover, such as Leisure and Hospitality (restaurants, hotels) and Retail Trade, have the highest quits rates (often exceeding 3-4%). More stable sectors like Government, Finance, and Manufacturing usually have much lower rates (1-2%).
The turnover rate includes all separations—quits, layoffs, discharges, and retirements. The quits rate specifically measures *voluntary* separations initiated by the employee. Therefore, the quits rate is a subset of the total turnover rate and focuses purely on worker-initiated churn.
No. Retirements are classified under "Other Separations" in the JOLTS report, along with deaths and disability. The quits rate strictly counts workers who leave a job to take another one or leave the workforce voluntarily (excluding retirement).
The data is published monthly by the U.S. Bureau of Labor Statistics (BLS) in the "Job Openings and Labor Turnover Summary" (JOLTS) news release. It is typically released about a month after the reference period.
The Bottom Line
The quits rate serves as one of the most vital "under-the-hood" indicators of the U.S. labor market, providing insights that broader metrics often miss. While the headline unemployment rate tells us how many people are struggling to find work, the quits rate tells us how confident currently employed people are in finding *new* and *better* work. For investors, economists, and Federal Reserve policymakers, a rising quits rate is a flashing signal of potential wage inflation and a robust, possibly overheating economy. Conversely, a falling rate acts as an early warning system for waning consumer confidence and potential economic stagnation. By monitoring this metric alongside job openings and layoff data, market participants can gain a nuanced, real-time view of labor dynamics and the shifting balance of power between employers and employees.
More in Labor Economics
At a Glance
Key Takeaways
- A high quits rate suggests workers are confident in the labor market and their ability to find better opportunities.
- A low quits rate indicates uncertainty or fear about job security.
- It is closely watched by the Federal Reserve as a leading indicator of wage inflation.
- Often rises during economic expansions and falls during recessions.