Why Are People Quitting Their Jobs in Record Numbers?

If you've been watching the latest job reports, confused as to how inflation could be at a record high but workers are still quitting their jobs in unprecedented numbers, you're certainly not alone.

In this segment of Backstage Pass, recorded on Nov. 12, Fool contributors Toby Bordelon, Jon Quast, and Rachel Warren discuss these seemingly mutually exclusive trends. 

Toby Bordelon: Let's see. Let's go to our third question here moving right along. We got some confusing news today, guys, on consumers. I am not sure I really get this. We got a report on consumer sentiment. On the one hand, it looks like consumer sentiment is at a 10-year low, lowest it been in a decade. One in four consumers are reporting they're scaling back their standard of living because of inflation concerns. [laughs] On the other hand, 4.4 million people quit their jobs in September.

This is a record. The highest number of job resignations in a month long period since they've been keeping track on this, I guess. What's going on here? Are people are really saying, "Man, this economy really sucks. I'm worried about making ends meet. But you know what? What the heck, I'm just going to quit my job anyway and hope for the best." I don't understand that.

Jon Quast: It's probably all the Dogecoin millionaires out there. [laughs]

Toby Bordelon: Maybe that's it.

Jon Quast: That's it. [laughs]

Toby Bordelon: That's a real possibility. I don't know what's going on. Maybe there's a disconnect in timing because this jobs thing goes from September, maybe the consumer sentiment is a little bit later than that. Maybe things are actually going really well for 4.4 [laughs] million people, maybe they're Dogecoin millionaires there, and everybody else is not doing so well. That's a possibility.

Something else? Look, we're talking about investors. What do I do with this as an investor? This confuses me. I want you guys to tell me, is there a company or an investment that you can offer me for this confusion and uncertainty? What do I go with? Rachel, what do you think?

Rachel Warren: I actually found these numbers really interesting and I do think it's partially disconnect, but I do think there's some other factors at play, and I'm going to go briefly into that before I talk about a company that I actually think is a great choice in this uncertain environment. I personally don't necessarily think that it's that 4.4 million people are in a different situation than the rest of consumers.

I think that both of these facts that you have a 10-year low in consumer sentiment and you also have a record number of people quitting their jobs. I don't think they have to be mutually exclusive, I think they can exists hand-in-hand. Here's why. You look at the reasons that people are quitting their jobs, the areas that they're quitting in.

These industries that are seeing the highest quit rates. You start out with this basic number, about 3% of the worker population in the U.S quit their jobs in September. But then, you look at the industries where most of these quit rates are stemming from.

These are areas like retail, hospitality, health services, recreation, travel and leisure, even state and local government roles. Many of these are industries where we've been contending with sometimes, low wages and in cases perhaps, less than ideal working conditions for some time.

And that has only increased during the pandemic. Now, workers have a lot of leverage. I was reading recently this whole labor shortage, it's worker driven. Clearly, it's not because there's a shortage in job roles.

Workers have the leverage now, it doesn't surprise me that these are the same areas, these industries where we're seeing high quit rates, even though inflation is high and consumers are worried about the prices of every day goods. People are searching for roles, they're searching for companies that pay better wages, perhaps that offer more flexibility.

I also think if you're worried about affording basic goods when the cost of inflation is high, it makes sense that some of the industries where you're seeing the highest quit rates are ones where wages have historically been low and conditions are often less than stellar, particularly in a pandemic environment.

Some of the workers in areas like hospitality and retail, for example, that historically, wages have been low and sometimes, are at or below minimum wage. Those are also areas where workers perhaps have to contend with some of the most safety concerns during the pandemic. I think it almost makes sense that you're still seeing these high quit rates in these areas, even though consumer goods are skyrocketing.

I think as an investor, you're looking at this. I don't think these trends are going to be letting up in the near future, I think these are trends we've been seeing in recent jobs reports, and I think that will continue.