Here's why it's great that so many people are quitting their jobs

People are quitting their jobs. And that’s actually great news.

For the month of July, the JOLTS “quits rate” remained at 1.9%, down slightly from the cyclical high of 2.0% in March, but way up from its 2009 low of 1.3%. This upward trending quits rate could be interpreted as a good economic sign for two reasons.

First of all, although “quitting” has a negative tone to it, as Fed Chair Janet Yellen sees things, the quits rate is an indicator of rising worker confidence about the labour market.

During good economic times, people feel comfortable quitting a job because they believe that they can soon find another (or because they have already found another one.) On the flip side, when there are layoffs during economic downturns, few are bold enough to risk jumping ship.

Furthermore, “the quits rate tends to be a leading indicator of wage growth,” as Deutsche Bank economist Joseph LaVorgna points out. “As the chart below illustrates, the quits rate historically leads the change in average hourly earnings of production and non-supervisory workers by three quarters.”

In other words, the fact that people want to quit and/or are quitting their jobs, could be a sign that the economy is getting better, and that we’ll see wage growth soon.

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