Connect with us

Uncategorized

The Economics of Quiet Quitting: Taking Stock and Looking Ahead

In the last several months, growing attention has been paid both in print and social media to what has become known as “The Great Resignation,” a term…

Published

on

In the last several months, growing attention has been paid both in print and social media to what has become known as “The Great Resignation,” a term referring to the increase in job openings and corresponding increase in employment turnover rate since 2021. To place this phenomenon in context, according to a November 2022 news release by the Bureau of Labor Statistics (BLS), the number of job openings has steadily increased from January 2012 to the December 2020, during which time the number of job openings rose from 3.9 million to 6.9 million.1 From January 2021 to September 2022, however, that figure has jumped from 7.2 million to approximately 10.7 million job openings.

In the wake of the reopening and recovery of the United States economy following COVID-19, such an increase in the number of job openings is to be expected. However, during this same period, the reported rate of job quits reported monthly by BLS has also increased. From January 2012 to December 2020, the rate of employees who have quit increased from 1.5 percent to 2.4 percent, while from January 2021 to September 2022, the “job quits rate” increased to 2.7 percent (peaking at 3 percent in December 2021).

Placing this Great Resignation in longer-term perspective will draw attention to and particularly focus on a corresponding labor market trend, recently dubbed “quiet quitting.” My purpose here will neither be to dismiss nor lend credence to whether quiet quitting is something new, per se. Rather, by taking stock of past trends, my goal will be to suggest, not predict, what we can expect in the future by explicating an economic rationale to “quiet quitting.” My argument is that what is known today as “quiet quitting” is simply a new manifestation of labor market turnover, and therefore a difference of degree, rather than of kind, in labor market trends.

According to a Wall Street Journal article, quiet quitting “isn’t about getting off the company payroll.” Rather, “the idea is to stay on it—but focus your time on the things you do outside of the office.”2 Quiet quitting, unlike quitting in the traditional sense of the term3, suggests that employees continue to work, but become less invested in their current employment, doing enough not to get fired, but not enough to accrue the human capital investments necessary for advancement, such as learning additional job skills specific to one’s current employment. While the term “quiet quitting” is new, and therefore continues to evolve, what it implies is that more time on the job is spent, as Ellis and Yang state, “on the things you do outside of the office.”

Much of the attention that has been drawn to quiet quitting has been based on a poll conducted by Gallup since 2000, measuring “the percentage of U.S. employees who are engaged at work.”4 “Employee Engagement,” according to Gallup, is defined as “the involvement and enthusiasm of employees in both their work and workplace.” According to an article entitled “Is Quiet Quitting Real?” by Jim Harter, Chief Scientist for Gallup’s workplace management practice, these data imply half of the U.S. work force currently employed is quietly quitting. Only 32 percent of employees reported to be “engaged”, while 50 percent were “not engaged” and 18 percent are “actively disengaged” (or “loudly quitting”) at work.

However, according to Derek Thompson at The Atlantic, quiet quitting is a “fake trend” and therefore unreflective of anything new in the labor market. Rather, “quit quitting” is but a reversion to the mean in labor market trends from the standpoint of Gallup’s data. Although indeed Thompson concedes the fact that worker engagement has decreased 36 percent in January 2020 to 32 percent in September 2022, both figures are still above the reported figure of 26 percent of workers being “engaged” at work reported in 2000.5 This is much is admitted in another article by Jim Harter, who states that, with the exception of 2020, “[e]mployee engagement has been a steady metric without sharp ups and downs since Gallup began tracking it in 2000.”

“Describing a particular phenomenon by appealing to psychological reasons is not the same as providing an economic explanation.”

My point in providing this summary has not been to give an exhaustive account of what appear (or do not appear?) to be opposing arguments regarding whether quiet quitting is “real” or “fake” by appealing to working polls that “measure” a worker’s psychological attachment to their work. I do not wish to discount claims that “quiet quitting” can be attributed to psychological reasons, nor do I suggest that COVID-19 has not affected worker attitudes toward their employment. But claiming that workers are “quietly quitting” by describing them as “detached”, “burned out”, or “lazy” gives too myopic a rationale centered on COVID-19 that misdirects attention to explaining “quiet quitting” as a phenomenon that has been recently accelerated, but not caused by COVID-19. Describing a particular phenomenon by appealing to psychological reasons is not the same as providing an economic explanation. As F.A. Hayek best states this point:

  • It is a mistake, to which careless expressions by social scientists often give countenance, to believe that their aim is to explain conscious action. This, if it can be done at all, is a different task, the task of psychology. For the social sciences the types of conscious action are data and all they have to do with regard to these data is to arrange them in such orderly fashion that they can be effectively used for their task (emphasis original, [1952] 1979: 68).

To be fair, I am not suggesting that economic explanations have not been provided. In fact, Greg Rosalsky and Alina Selyukh have argued that “quiet quitting” should be understood as a principal-agent problem. As they argue: “In this model, the principal (the boss) enlists an agent (the worker) to do a specific job for them. The problem: the principal doesn’t have complete information on exactly what their agent is doing. Is their agent being productive on the job? Or are they slacking? In order to make sure the agent is doing their bidding, the principal must figure out ways to incentivize and monitor them. The model has implications for the dramatic changes in office life—or lack thereof—we’ve seen in recent years. With the mass adoption of remote work, many managers seem to be struggling with how to effectively monitor and motivate their employees.”6 It is on this basis, they argue, that what is known as “The Great Resignation” should be relabeled “The Great Renegotiation.”

While I do not disagree with the economic basis of Rosalsky and Selyukh’s conclusions, the implications of their argument are incomplete. They suggest that “The Great Resignation” shows “a large chunk of our labor force was always phoning it in, but now they have a loud social-media presence and better branding.” Indeed remote work presents a principle-agent problem between employers and employees. Yet this claim misdirects attention to the fact that, whether “quiet quitting” is “real” or “fake”, to imply that “quiet quitting” is simply consumption of on-the-job leisure overlooks that what can also be understood as an “idle labor resource” that is employed seeking information about alternative job opportunities.

My reframing suggested here is not new but based on the work of economists William H. Hutt ([1939] 1977) and Armen A. Alchian (1969) and is consistent with the observations made earlier by Jim Harter and Derek Thompson. As Harter states: “Most employees who are not engaged or actively disengaged are already looking for another job” (emphasis added); and according to Thompson: “most people weren’t quitting to retire; they were quitting to take a new job” (emphasis original).

Returning to my introduction, and consistent with BLS data, increased turnover along with a corresponding increase in job openings was not caused by COVID-19, per se, but accelerated by government responses to the pandemic. What COVID-19 lockdowns accelerated was the use of already-available computer technology and other platforms, such as Zoom, that could not only transfer work to remote locations. More importantly, these same uses decreased the relative costs of employees seeking information about alternative job opportunities from other employers virtually. Whereas in the past, as suggested by Hutt and Alchian, workers would actively quit their job in order to become actively “employed” in discovering information about alternative employment opportunities,” the relative decline in the cost of discovering information about alternative job opportunities has allowed workers, more than ever, to seek new employment elsewhere while remaining currently employed, although in a passive or “quiet” manner.

For more on these topics, see

Rather than taking a temporary wage cut by becoming unemployed to seek information specific to other jobs, the wage cut incurred through “quietly quitting” comes in the form of foregone human capital investments specific to their current employment that would have allowed workers to command higher wages from their current employer. Hence, if we are to seek an economic rationale for “quietly quitting” which fits with longer-term labor market phenomena and gives us some reliable expectations about continued labor-market trends, it must be understood not as a change in preferences in employees, but due to primarily to a decline in information costs for employees seeking alternative employers while remaining currently employed.


References

Alchian, Armen A. 1969. “Information Costs, Pricing, and Resource Unemployment.” Western Economic Journal, vol.7, no. 2: 109-128

Hayek, F.A. [1952] 1979. The Counter-Revolution of Science: Studies on the Abuse of Reason. Indianapolis: Liberty Press.

Hutt, William H. [1939] 1977. The Theory of Idle Resources, 2nd Edition. Indianapolis: Liberty Press.

Mulligan, Casey B. 2012. The Redistribution Recession: How Labor Market Distortions Contracted the Economy. New York: Oxford University Press.


Footnotes

[1] Bureau of Labor Statistics’ Job Opening and Labor Turnover Survey, accessed 11/29/2022.

[2] Lindsay Ellis and Angela Yang, “If Your Co-Workers Are ‘Quiet Quitting,’ Here’s What That Means.” The Wall Street Journal, August 12, 2022.

[3] Also of importance, though not the focus here, are labor market policies that have led to labor market distortions that had accelerated a fall in the labor force participation rate, which has steadily declined in the United States since 2000. See Mulligan (2012) and EconTalk podcast episode Edward Glaeser on Joblessness and the War on Work, March 26, 2018.

[4] Gallup, Employee Engagement. Accessed 11/29/2022.

[5] Derek Thompson, “Quiet Quitting Is a Fake Trend.” The Atlantic, September 16, 2022.

[6] Greg Rosalsky and Alina Selyuch, “The economics behind ‘quiet quitting’—and what it should be called instead.” Planet Money, September 13, 2022.


* I wish to thank Peter Boettke, Thea Burress, Christopher Coyne, and Amy Willis for their comments and feedback. Special thanks are due to Andreea Candela for improving an earlier draft of this essay. Any remaining errors are entirely my own.

Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Program Director of Academic and Student Programs at the Mercatus Center at George Mason University.


(0 COMMENTS)

Read More

Continue Reading

Uncategorized

Schedule for Week of January 29, 2023

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.The FOMC meets this week, and the FO…

Published

on

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.

Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.

The FOMC meets this week, and the FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

----- Monday, January 30th -----

10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

----- Tuesday, January 31st -----

9:00 AM: FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

9:00 AM ET: S&P/Case-Shiller House Price Index for November.

This graph shows the Year over year change in the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

10:00 AM: The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, February 1st -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 235,000 added in December.

10:00 AM: Construction Spending for December. The consensus is for a 0.1% decrease in construction spending.

Job Openings and Labor Turnover Survey10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings decreased in November to 10.458 million from 10.512 million in October

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 48.0, down from 48.4 in December.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

Vehicle SalesAll day: Light vehicle sales for January. The consensus is for light vehicle sales to be 14.3 million SAAR in January, up from 13.3 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

----- Thursday, February 2nd -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 200 thousand initial claims, up from 186 thousand last week.
----- Friday, February 3rd -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for December.   The consensus is for 185,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 223,000 jobs added in December, and the unemployment rate was at 3.5%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The pandemic employment recession was by far the worst recession since WWII in percentage terms. However, as of August 2022, the total number of jobs had returned and are now 1.24 million above pre-pandemic levels.

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 50.3, up from 49.6 in December.

Read More

Continue Reading

Uncategorized

US gov’t $1.5T debt interest will be equal 3X Bitcoin market cap in 2023

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Published

on

The U.S. will pay over $1 trillion in debt interest next year, the equivalent of three or more Bitcoin market caps at current prices.

Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.

The latest analysis of U.S. macroeconomic data has led one market strategist to predict quantitative tightening (QT) ending to avoid a “catastrophic debt crisis.”

Analyst: Fed will have “no choice” with rate cuts

The U.S. Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of COVID-19-era money printing.

While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.

“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.

“Higher for longer is a fantasy not rooted in math reality.”

Henrich uploaded a chart showing interest payments on current U.S. government expenditure, now hurtling toward $1 trillion a year.

A dizzying number, the interest comes from U.S. government debt being over $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henrich noted.

The phenomenon has not gone unnoticed elsewhere in crypto circles. Popular Twitter account Wall Street Silver compared the interest payments as a portion of U.S. tax revenue.

“US paid $853 Billion in Interest for $31 Trillion Debt in 2022; More than Defense Budget in 2023. If the Fed keeps rates at these levels (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt,” it wrote.

“The US govt collects about $4.9 trillion in taxes.”
Interest rates on U.S. government debt chart (screenshot). Source: Wall Street Silver/ Twitter

Such a scenario might be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have corresponded with increased appetite for risk assets across the mainstream investment world.

The Fed’s unwinding of that policy accompanied Bitcoin’s 2022 bear market, and a “pivot” in interest rate hikes is thus seen by many as the first sign of the “good” times returning.

Crypto pain before pleasure?

Not everyone, however, agrees that the impact on risk assets, including crypto, will be all-out positive prior to that.

Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics

As Cointelegraph reported, ex-BitMEX CEO Arthur Hayes believes that chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.

If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes that the damage will have already been done before QT gives way to quantitative easing.

“This scenario is less ideal because it would mean that everyone who is buying risky assets now would be in store for massive drawdowns in performance. 2023 could be just as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Read More

Continue Reading

Uncategorized

Stay Ahead of GDP: 3 Charts to Become a Smarter Trader

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report…

Published

on

When concerns of a recession are front and center, investors tend to pay more attention to the Gross Domestic Product (GDP) report. The Q4 2022 GDP report showed the U.S. economy grew by 2.9% in the quarter, and Wall Street wasn't disappointed. The day the report was released, the market closed higher, with the Dow Jones Industrial Average ($DJIA) up 0.61%, the S&P 500 index ($SPX) up 1.1%, and the Nasdaq Composite ($COMPQ) up 1.76%. Consumer Discretionary, Technology, and Energy were the top-performing S&P sectors.

Add to the GDP report strong earnings from Tesla, Inc. (TSLA) and a mega announcement from Chevron Corp. (CVX)—raising dividends and a $75 billion buyback round—and you get a strong day in the stock markets.

Why is the GDP Report Important?

If a country's GDP is growing faster than expected, it could be a positive indication of economic strength. It means that consumer spending, business investment, and exports, among other factors, are going strong. But the GDP is just one indicator, and one indicator doesn't necessarily tell the whole story. It's a good idea to look at other indicators, such as the unemployment rate, inflation, and consumer sentiment, before making a conclusion.

Inflation appears to be cooling, but the labor market continues to be strong. The Fed has stated in many of its previous meetings that it'll be closely watching the labor market. So that'll be a sticky point as we get close to the next Fed meeting. Consumer spending is also strong, according to the GDP report. But that could have been because of increased auto sales and spending on services such as health care, personal care, and utilities. Retail sales released earlier in January indicated that holiday sales were lower.

There's a chance we could see retail sales slowing in Q1 2023 as some households run out of savings that were accumulated during the pandemic. This is something to keep an eye on going forward, as a slowdown in retail sales could mean increases in inventories. And this is something that could decrease economic activity.

Overall, the recent GDP report indicates the U.S. economy is strong, although some economists feel we'll probably see some downside in 2023, though not a recession. But the one drawback of the GDP report is that it's lagging. It comes out after the fact. Wouldn't it be great if you had known this ahead of time so you could position your trades to take advantage of the rally? While there's no way to know with 100% accuracy, there are ways to identify probable events.

3 Ways To Stay Ahead of the Curve

Instead of waiting for three months to get next quarter's GDP report, you can gauge the potential strength or weakness of the overall U.S. economy. Steven Sears, in his book The Indomitable Investor, suggested looking at these charts:

  • Copper prices
  • High-yield corporate bonds
  • Small-cap stocks

Copper: An Economic Indicator

You may not hear much about copper, but it's used in the manufacture of several goods and in construction. Given that manufacturing and construction make up a big chunk of economic activity, the red metal is more important than you may have thought. If you look at the chart of copper futures ($COPPER) you'll see that, in October 2022, the price of copper was trading sideways, but, in November, its price rose and trended quite a bit higher. This would have been an indication of a strengthening economy.

CHART 1: COPPER CONTINUOUS FUTURES CONTRACTS. Copper prices have been rising since November 2022. Chart source: StockCharts.com. For illustrative purposes only.

High-Yield Bonds: Risk On Indicator

The higher the risk, the higher the yield. That's the premise behind high-yield bonds. In short, companies that are leveraged, smaller, or just starting to grow may not have the solid balance sheets that more established companies are likely to have. If the economy slows down, investors are likely to sell the high-yield bonds and pick up the safer U.S. Treasury bonds.

Why the flight to safety? It's because when the economy is sluggish, the companies that issue the high-yield bonds tend to find it difficult to service their debts. When the economy is expanding, the opposite happens—they tend to perform better.

The chart below of the Dow Jones Corporate Bond Index ($DJCB) shows that, since the end of October 2022, the index trended higher. Similar to copper prices, high-yield corporate bond activity was also indicating economic expansion. You'll see similar action in charts of high-yield bond exchange-traded funds (ETFs) such as iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR Barclays High Yield Bond ETF (JNK).

CHART 2: HIGH-YIELD BONDS TRENDING HIGHER. The Dow Jones Corporate Bond Index ($DJCB) has been trending higher since end of October 2022.Chart source: StockCharts.com. For illustrative purposes only.

Small-Cap Stocks: They're Sensitive

Pull up a chart of the iShares Russell 2000 ETF (IWM) and you'll see similar price action (see chart 3). Since mid-October, small-cap stocks (the Russell 2000 index is made up of 2000 small companies) have been moving higher.

CHART 3: SMALL-CAP STOCKS TRENDING HIGHER. When the economy is expanding, small-cap stocks trend higher.Chart source: StockCharts.com. For illustrative purposes only.

Three's Company

If all three of these indicators are showing strength, you can expect the GDP number to be strong. There are times when the GDP number may not impact the markets, but, when inflation is a problem and the Fed is trying to curb it by raising interest rates, the GDP number tends to impact the markets.

This scenario is likely to play out in 2023, so it would be worth your while to set up a GDP Tracker ChartList. Want a live link to the charts used in this article? They're all right here.


Jayanthi Gopalakrishnan

Director, Site Content

StockCharts.com

 

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Read More

Continue Reading

Trending