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Reviews |  The great resignation is coming to an end, according to statistics

All the evidence suggests that right now it’s unusually easy for American workers to find jobs and unusually hard for employers to find workers. The strange thing is that we have a very tight labor market, even though the number of employees is still around one and a half million below pre-pandemic levels and even more below the pre-pandemic trend:

For some time, many people, including myself, have been telling a story about this situation which is called the Great Resignation. This story goes like this: The Covid pandemic has caused many Americans to reconsider whether they really want or need to continue working. Fear of infection or lack of childcare kept some workers at home, where they found that the financial rewards of their work were not enough to offset the costs of transportation and the inconvenience of their work environment. Older workers, forced into unemployment, decided they might as well retire early. etc

Well, when my information changes, I change my mind – a line often but dubiously attributed to John Maynard Keynes, but whatever. And the last few months of data have all but destroyed the narrative of the great resignation.

Have a large number of Americans dropped out of the labor force, that is, they are not working and not actively looking for work? To answer this question, you need to look at age-adjusted data; the decline in labor market participation because a growing number of Americans are over 65 does not make sense in this context. Thus, economists often look at the labor force participation of Americans in their prime working years: ages 25 to 54. And guess what? This participation rate has jumped recently. It’s still slightly below where it was on the eve of the pandemic, but it’s back to 2019 levels, which hardly look like a big letdown:

What about early retirement? If this largely happened, we would expect to see a reduction in labor force participation among older workers, aged 55 to 64. But they quickly returned to the job market:

A few months ago, it still seemed reasonable to speak of a Great Resignation. At this point, however, there is practically nothing there. It is true that an unusually large number of workers quit their jobs, but they left for other, presumably better, jobs rather than leaving the labor market. As a labor economist Arindrajit Dube said, it’s more of a Big Reshuffle than a Big Resignation.

However, if most of the workers have returned to the labor market, how can the apparent paradox with which I began this bulletin be explained? How can labor markets be so tight when wage employment is still well below the pre-pandemic trend?

I’m sure labor economists struggle to figure this out correctly, but a quick look at the evidence suggests a few factors that many people telling the big quit story – again, myself included – have missed .

First, as economist Dean Baker has pointed out, the most commonly cited measures of employment do not take into account the self-employed, and self-employment has increased significantly, about 600,000 workers more than average in 2019. Some of them that self-employment may be fictitious – construction workers who are employees in all but name but work for companies that classify them as independent contractors to avoid regulation. But it also appears that part of the Great Reshuffle involved Americans concluding that they could improve their lives by starting their own businesses.

Second, a point that receives much less attention than it should is the drop in immigration since Donald Trump came to power, which turned into a plunge with the arrival of the pandemic:

Many immigrants are of working age and highly motivated; their absence means that employment should not be expected to maintain its old trend.

Does the diminishing plausibility of the Great Resignation narrative have political implications?

Well, I hate to say this, but it seems to strengthen the case for higher interest rates. Until recently, it was quite common for monetary doves to claim that we weren’t truly at full employment because there were still plenty of potential workers sitting on the sidelines. This is now a hard case to make; the US economy now looks overheated in almost every way, which means it needs a little cooling.

The other implication is that if we want to revive the economic vitality of the United States, we really should try to restore our nation’s historic role as a destination for ambitious immigrants. But it’s not a political idea likely to have much success, given the anti-immigrant hysteria on the American right.

Either way, you should know that all those stories about how Americans don’t want to work anymore seem to have evaporated. The Great Resignation now looks like a Great Misunderstanding.

Wage inflation could slow.

Great shortage of trucks can also end.

Things are calming down a bit on delivery.

There is a lot of grain blocked in Ukraine.


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