Wisconsin is part of the Great Resignation, and employers have yet to adjust

One item that’s gotten a lot of recent attention is what’s known as the Great Resignation, where record numbers of Americans have quit their jobs in recent months. Among the reasons mentioned for all the people leaving jobs includes increased COVID infections, substandard pay, and a lack of child care to make it easier for parents to work.

The St. Louis Fed was able to put numbers behind the anecdotes, and says a whole lot of people have retired out of the work force in the COVID World.

The St.L Fed says there was going to be some increase in retirees in 2020 and 2021 due to aging demographics. But what’s happened in the last 18 months goes far above that.

The figure shows that the percentage of retirees in the U.S. population (the blue line) was relatively stable at around 15.5 percent until 2008 (the vertical dashed line). That year marked not only the beginning of the Great Financial Crisis but also when the oldest Baby Boomers, those born in 1946, turned 62 years of age and became eligible to receive Social Security retirement benefits. As Baby Boomers began retiring, the percentage of retirees in the U.S. population grew to 18.3 percent in February 2020, the eve of the COVID-19 outbreak. The percentage then increased at a much faster rate, reaching 19.3 percent in August 2021.

One simple way to disentangle "normal" retirements from excess retirements due to COVID-19 is to compare the predicted percentage of Baby Boomer retirements from 2008 to February 2020 (the red dashed line in the figure) with the actual percentage of all retirements. The 0.92 percent difference between the two can be interpreted as the excess retirements. Based on that number, as of August 2021, there were slightly over 3 million excess retirements due to COVID-19, which is more than half of the 5.25 million people who left the labor force from the beginning of the pandemic to the second quarter of 2021.

There are several reasons why some people may have decided to retire early, some directly related to the pandemic. First, these "excess retirees" tend to be older people, who are especially vulnerable to COVID-19 and were thus motivated to leave the labor force because of the serious risk of infection and death. Second, the COVID-19 recession was abnormal in the sense that it featured a sharp downturn in real economic activity but also rising asset values, such as for housing and stocks. Standard theories of household behavior predict that when people get richer, they work less, and there is some evidence that the evolution of asset values influenced labor force participation in previous recessions, especially for those closer to retirement.5 The large rise in asset valuations during the pandemic suggests that retirement may have become feasible for many people.

So we saw a whole lot of people leave the work force on the older end of the market, and there aren’t nearly as many coming in to replace these workers. Especially as COVID resurged in Summer 2021.

And while most places have had an uptick in quits in 2020 and especially 2021, some states are seeing more of it than others.

Kentucky, Idaho, South Dakota and Iowa reported the highest increases in the rates of workers who quit their jobs in August, according to a new glimpse of quit rates in the labor market released Friday.

The largest increase in the number of quitters happened in Georgia, with 35,000 more people leaving their jobs. Overall, the states with the highest rates of workers quitting their jobs were Georgia, Kentucky and Idaho.

The report from the Bureau of Labor Statistics builds out a portrait of August's labor market, with historic levels of people leaving jobs and a near-record number of job openings showing the leverage workers have in the new economy. It offers the first detailed insight into the state-by-state geography of this year's Great Resignation.

You dig further into the state-by-state JOLTS report, and you see a few Midwestern states on the list of those with highest rate of quits in August.

Highest rates of quits vs total jobs, Aug 2021
Kentucky 4.5%
Georgia 4.2%
Idaho 4.1%
Alaska 3.9%
Indiana 3.6%
Iowa 3.6%
Nevada 3.5%
Illinois 3.5%

Wisconsin was just below this group of states, with a (seasonally adjusted) quit rate of 3.4%. That represented 97,000 state workers, and was a notable jump from the already-high levels of previous 3 months. I'm also going to include August 2020's figure, to give you an idea of how different things look today.

That 97,000 figure dwarfs the estimated 21,000 Wisconsinites who were laid off/discharged from jobs in August – a rate of 0.7% that was below the US average of 0.9% and was 2nd lowest in the US. Put that together, and it means there were a lot of Wisconsin businesses looking for workers at the time.

While the number of openings decreased from July’s record highs (mirroring the pattern in the rest of America), they were still quite high in August. However, less than half of those openings were filled, which helps explain why the state ended up losing 10,800 jobs in that month despite so many employers claiming they needed people. (openings are in yellow, hires are in gray)

As for the future, let’s go back to the St. Louis Fed’s article on the big increase in Boomer retirees. They say that a major wild card is if these recent retirees stay retired, or if they come back to work when conditions change.

Finally, there is the question of whether the excess retirements are permanent. If they are, then the amount of slack in the labor market may be smaller than the 5.25 million "lost workers" may suggest. However, many of these new retirees may decide to return to the labor force, which will depend on personal factors as well as aggregate labor market conditions.

And to me, that means getting COVID back under control and offering more supports for workers of all ages. This will make it more worthwhile to return to work, and if employers do their part and raise wages to a more acceptable level, then we might start to see the record rate of quits level off, hiring pick back up, and some of these imbalances start to even up.

If we don’t see those adjustments and new supports get put in place in the next few months, then get used to things staying disrupted with high levels of jobs going unfilled. That’s doubly true in Wisconsin, where it seems workers had had enough by August while employers weren’t willing to make the adjustments necessary to get the workers that they claimed they needed.