June 2023 NC Economy Watch: The Tight Labor Market and the Not-So-Great Resignation

Welcome to the June 2023 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.

In this edition of NC Economy Watch, we check in on labor market conditions in our state. Fewer workers are quitting their jobs now than during the peak of the so-called “Great Resignation”. While this might suggest conditions are starting to normalize, other evidence shows our labor market remains out of balance, with still too many job openings and not enough jobseekers.

The Tight Labor Market and the Not-So-Great Resignation

We follow labor market trends closely here at LEAD, and for good reason. The tight labor market conditions seen in North Carolina over the past several years have resulted in nearly unprecedented employment opportunities for jobseekers and hiring difficulties for employers. Tight labor markets have in turn contributed to some of the most significant features of our pandemic-era economy, such as robust consumer spending, decades-high price inflation, and rising interest rates.

Which is why we took notice when the US Bureau of Labor Statistics recently reported a sharp decrease in the rate at which workers voluntarily leave their jobs, also known as the “quits rate”.¹ Voluntary separations are often interpreted as a sign of confidence in the labor market since most workers are unlikely to quit unless they can find employment elsewhere. The quits rate in North Carolina rose as high as 3.9% in summer 2021, part of a nationwide wave of job-hopping somewhat misleadingly dubbed the “Great Resignation” [Figure 1].

Figure 1

That was then. Now, the quits rate in North Carolina has declined to 2.7% — nearing the rate of 2.4% seen the outset of the COVID-19 recession and approaching the average rate of 2.2% we saw during the early part of the last economic expansion. It appears the “Great Resignation" is fading as the quits rate returns to its historical norm. This suggests workers might be growing less confident about their job prospects.

Does this mean the labor market is finally loosening up? It’s hard to say for sure. While a lower quits rate could signal a normalization in labor market conditions, employers remain eager to hang onto their workers, and layoffs remain relatively uncommon.² Meanwhile, data from our Labor Supply and Demand Dashboard continues to show the labor market is out of balance. Our state had around 137,000 more job openings and 9,000 fewer active jobseekers in April 2023 than we had prior to the COVID-19 recession [Figure 2]. These numbers have hardly budged over the past ten months, despite an apparent slowdown in the broader economy.

Figure 2

Even if conditions moderate further in the months ahead, the degree of softening required to restore balance to our labor market would be enormous. North Carolina had only 0.9 jobseekers per job opening in April 2023. At our current level of job openings, we would need to add nearly 230,000 jobseekers to return to the rate of 1.6 jobseekers per job opening we saw in February 2020, and we’d need around 740,000 more jobseekers to achieve the pre-pandemic average of 3.0 jobseekers per job opening.³

The likeliest paths for returning our labor market to normal conditions would be either a hard crash into an economic recession or a “soft landing”. A recession would likely unleash a flood of unemployed jobseekers, helping restore balance to the labor market at the awful cost of sudden dislocation and loss of livelihoods. The more desirable path would be a soft landing: a slowing economy with a gradually rising number of jobseekers per job opening, but without the trauma of an outright recession. Soft landings are unusual, but so is the pandemic-era economy, and while history suggests a recession is the most likely path to a balanced labor market, the resilience of our economy over the past year offers some hope that things might turn out differently this time.

For inquiries and requests, please contact:   
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy   
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)   
mbodane@commerce.nc.gov 

¹The quits rate is defined as the number of voluntary job separations as a share of overall employment in a given month.

²The rate of layoffs and discharges in North Carolina was 1.0% in April 2023, compared to 1.4% in February 2020 and 2.2% at the height of the Great Recession in December 2008. Source: US Bureau of Labor Statistics (Job Openings and Labor Turnover Survey)

³The average rate in North Carolina from December 2000, the earliest date available, through February 2020 was 3.0 jobseekers per job opening.