PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Tight Labor Market Persists: Job Openings and Quits Hit Record Highs

By at 3 May, 2022, 12:59 pm

by Raymond J. Keating –

National Small Business Week is the right time to remind people, including policymakers, that small businesses are the engines of job creation in the U.S. economy.

For example, as noted in the Office of Advocacy’s “Frequently Asked Questions” publication, 62 percent of net new job created since 1995 have been created by small businesses, with about two-thirds coming from small businesses over the period of 2000 to 2019. And according to data from the SBA’s “2020 Small Business Profile,” small businesses created 1.6 million net new jobs in 2019, with 1.1 million created by firms with fewer than 20 workers.

Now, let’s turn to the latest data from the Bureau of Labor Statistics’ “Job Openings and Labor Turnover” report, again keeping in mind that the bulk of new jobs come from smaller firms.

Job Openings Matched the Series High

The BLS noted, “The number of job openings was at a series high of 11.5 million on the last business day of March, although little changed over the month…” The job openings rate (i.e., the number of job openings divided by the sum of employment and job openings), at 7.1 percent, matched the series high. This dataset goes back to December 2000.

Source: Federal Reserve Bank of St. Louis, FRED

The BLS reported that job openings increased during March in retail trade (+155,000) and in durable goods manufacturing (+50,000).

“Quits” Reaches a High Mark

Also, the number of quits came in at a series high of 4.5 million, as did the quits rate (i.e., the numbers of employees who left voluntarily with the exception of retirements or transfers to other locations as a share of total employment) at 3.0 percent.

As SBE Council has previously noted, quits serve as an indicator of confidence among workers in terms of the jobs market, and/or where it is headed. A high number of quits reflects a high degree of confidence that another job has been secured or is available.

Source: Federal Reserve Bank of St. Louis, FRED

The trends in these two datasets make clear that U.S. small business owners continue to face a tight labor market. That is, a high level or rate of job openings means that businesses are having some difficulty in finding people to fill positions, and a high quits rate makes clear that workers in the labor force understand that they hold the upper hand currently in terms of being confident that they are able to improve their work situation.

In fact, as we have pointed out in our regular analyses of the Census Bureau’s Small Business Pulse Survey (conducted weekly but put on hold for this past week), labor shortages continue to hamstring many small businesses with conditions worsening since the start of the year.

The numbers and trends line up with various survey results showing that workers have yet to fully return to the labor force, and among those in the labor force, many are very willing to leave one job for another.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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