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Low job ‘churn’ hurting economic recovery

In an uncertain labor market, risk-averse employees would rather keep their jobs than quit to find a better fit. Here, empty O2 offices in Slough, England.

The Pulse slowed today on news that fewer Americans are quitting their jobs. It sounds counterintuitive, but what economists call “churn” -- when an employee leaves, thus opening a spot for someone new -- is actually a sign of a healthy job market.

When someone quits, they make way for promoting and hiring. New employees bring new skills and ideas, and those lead to greater profits. In fact, historically, high churn rates among American workers are often cited as key underlying factor in the country’s economic success.

The Wall Street Journal reports today that just two million of us gave our two-weeks notice in December, down a third from pre-recession averages. Two and a half years after the “end” of the Great Recession of 2007-09, American workers have become risk averse when it comes to big career decisions.

“Quitting, hiring and firing are all part of churn -- job turnover that, unlike layoffs or expansions, doesn't change the long-term size of a company,” Ben Casselman writes in the Journal today. “Churn makes up a huge part of the job market's daily turnover. A recent paper by researchers at Stanford University and the Bureau of Labor Statistics found that during the 2007-2009 recession, 80 percent of the reduction in hiring was associated with lower levels of churn, rather than with a decline in job creation.”

As the U.S. economy finds its feet again, experts will be looking at our willingness to swap jobs as a sign of a bona fide recovery. One question remains. Which comes first: jobs or our willingness to leave them?

About the author

Joel Patterson is the Associate Producer of Marketplace Money.

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