Labor Market Pessimism

Through the first six months of the year the number of workers who quit their job is down 28.5% from 2007.  Workers do not generally quit a job if they believe it will be difficult to find a new job.  A low quit rate is a symptom of worker pessimism in the labor market.

A second indication of labor market pessimism is that although the number of workers laid off through the first half of 2012 is down 3.3% from 2007, the number of laid off workers filing for unemployment insurance claims is up over 18% from 2007.  Workers who are laid off appear more pessimistic about finding a new job than they were in 2007 because they are much more likely to file for unemployment insurance.  A laid off worker who is fairly certain to be re-employed within a few weeks is much less likely to go to the trouble of filing for unemployment insurance claims.

The labor market recovery will be weak as long as quit rates remain far below pre-recession levels and new unemployment insurance claims stay at their current rate of 374,000 per week (compared to 317,000 per week in 2007).  The pessimism of those who have recently lost jobs and those who are considering a job move suggest that the unemployment rate is unlikely to drop over the next few months.

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