Article

What Explains the Great Resignation?

Ryan Michaels

Economist and Economic Advisor

Q2 2024

Economic Insights — It’s no surprise that quits rise in a tight labor market, but the scale of quits in 2021 came as a shock. We evaluate three explanations for what some call the Great Resignation.

According to the fast-growth narrative, the rise in quits was a byproduct of the fast economic recovery in 2021–2022. According to the wealth narrative, the sharp increase in household savings during the pandemic enabled workers to spend more time away from paid work, thereby inducing quits. And according to the telework narrative, quits rose because more workers transitioned to remote-work occupations. Each of these likely played a role. The fast recovery led to a general hiring boom, so workers were quitting more to take another job. However, many workers felt comfortable quitting the labor force altogether, indicating a role for the wealth narrative. The latter transitions were especially common among younger, female, nonwhite, and non-college-educated workers. Finally, there is mixed evidence that workers quit to pursue telework-friendly positions.

This article appeared in the Second Quarter 2024 edition of Economic Insights. Download and read the full issue.

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Rectifying Shortcomings in Measured Employer-to-Employer Flows in the U.S. Labor Market

Research in Focus – Shigeru Fujita of the Philadelphia Fed and his coauthors improve upon a measure of direct employer-to-employer transitions by accounting for missing survey data responses.

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Philadelphia Fed Releases Data on Worker Job Transitions

The Employer-to-Employer Transition Probability data provide insight into workers’ movements in the U.S. labor market. The series will be updated the second Friday of every month.