The Last Of The Great Resignation?

There is a huge focus on the Great Resignation, and with a record 4.5 million job quits in March 2022, it continues in full swing.

…But those numbers don’t tell the whole story.

The unemployment rate is down 3.6%. Housing prices are up 19.8% between February 2021 and 2022. And inflation closed March 2022 at 8.5% — the largest increase since December 1891.

So what do all these numbers mean?

Employment Rate

Low unemployment rates mean that more jobs are available than there are workers to fill those jobs. Employers are scrambling to find workers as is evidenced by hourly wages increase of 6% in March 2022 (three month moving average of median wage growth). The pandemic led to an imbalance between supply of workers and employer demand. As the pandemic closed, the Great Resignation kicked into high gear. A record 47.4 million workers voluntarily quit their jobs in 2021.

Inflation

Federal pandemic stimulus money topped out at $5 trillion. That money was poured into the U.S. economy to families, businesses, state and local aid, healthcare, and “other.” Workers received almost $700 billion in unemployment, including weekly stipends of $600 during the height of the pandemic. When more money is pumped into the economy, the dollar becomes weak and inflation climbs. The result of inflation is that the dollar doesn’t go as far as it used to.

Housing

Housing prices are up because supply is falling short of demand. Two primary reasons for this include a decrease in new inventory and people are staying put. Builders completed 1.3 million homes in February 2022, down almost 3% from the year before. Until supply can catch up to demand, housing prices will likely remain high. Another factor is that retirees are staying put. There isn’t a cost savings for longtime homeowners to move due to rising house prices and interest rates. NerdWallet reported 30-year fixed mortgage rates over 5.3% in May 2022 – higher than they’ve been in over a decade. Additionally, millennials have stepped into the prime home buying years, and we’re seeing them compete for single family homes.

So how do these factors play together?

During periods of inflation, governments go to work to balance the economy by making money more expensive or tightening the reins on the country’s tax and spending policies. Typically, during inflationary times, unemployment drops – this is good news if you’re looking for a job, maybe. More on that in a bit.

As interest rates increase to fight inflation, it in turn slows down the housing market. Higher interest rates translate to a decrease in affordability. The housing market is already trending in that direction. The National Association of Realtors reported that existing home sales dropped 2.4% for the third month in a row in April 2022. This is great if you’re looking to move to a better location for remote work. Not so fast. Companies may be pulling in the reins on what they’re willing to pay for workers.

How does this affect you?

Businesses are not immune to the effects of the economy. According to Monster experts, employers are quickly reaching their max – meaning they cannot continue to increase wages. As it sits, wages increased by 6% and inflation by 8.5% … wages are already losing the inflation battle. Monster experts believe that employers will continue to hire. Only instead of hiring full-time workers, they’ll hire multiple part-time, contract, or gig workers to cut employment costs. Also, gig workers can be hired for less hourly than a full-time employee.

Workers continue to fight inflation as the cost of goods increases and housing prices reach an unaffordable amount. Pew Research recently reported that 63% of workers who quit their job in 2021 did so because of low pay. The same poll cited three-in-ten workers quit because their employer didn’t offer enough hours.

So, what about those 47.4 million workers who quit their jobs? If they are living on their savings, their affordability is beginning to run low. This means that many may return to the job market – either as employees or contractors. Others may already have started their own business. New business applications continue to rise, up 23% in 2021 compared to 2020. Those individuals will be negotiating the current economy as new business owners and likely will not be hanging a “now hiring” sign anytime soon. Instead, they’re likely competing with other contractors and gig workers.

Both employees and employers should prepare for a potential correction in the market. Employers are receptive – they need employees. Before jumping ship, find out if there’s a solution with your current employer. If you’re looking for work, keep in the back of your mind that your window of asking for the moon might be closing.

These are opinions of the author based on research. While these trends and forecasts are based on historical information, no one predicted the pandemic and how that radically changed the way we work. Just as no one can predict exactly how the current economy will shake out. As Louis Pasteur so eloquently said: Luck favors the prepared.