The quits rate is not a measure of how many workers were laid off
JOLTS, the U.S. Job Openings and Labor Turnover Survey, contains a measure known as quits, referring to employees who voluntarily leave payroll.
Under the JOLTS definitions, quits do not include employer-initiated layoffs and discharges. Retirements and transfers to other locations are classified under other separations rather than quits. The quits rate measures voluntary quits relative to employment.
The indicator therefore focuses not on how aggressively companies are cutting staff, but on workers' willingness or ability to leave their current jobs.
Why can voluntary quitting tell us something about labor-market mobility?
Workers considering a voluntary departure usually take outside employment opportunities into account. When hiring is active, alternative positions are plentiful and workers believe another job can be found relatively easily, job switching may become more attractive.
When recruitment slows, searches take longer or workers become less confident about outside opportunities, they may be more willing to remain in their current positions even if the jobs are not ideal.
This is why the Bureau of Labor Statistics describes the quits rate as a measure that can help indicate workers' willingness or ability to leave jobs. A lower quits rate, however, does not by itself prove that the labor market is weak; it first tells us that voluntary worker movement has changed.
Why is the quits rate often discussed alongside wages?
When labor mobility is high, employers may have to compete not only to recruit new workers but also to retain existing employees. Greater outside opportunities can strengthen competition for labor.
If the quits rate falls persistently, job switching and worker mobility may be easing, which can change the amount of wage competition associated with turnover. The relationship is not mechanical, however. Productivity, inflation, industry demand and labor supply also influence wage growth.
The quits rate is therefore best used as a supplementary indicator. For more on the connection between wages and interest-rate expectations, see Why Slower Wage Growth Can Make Gold Markets Reassess Rates.
Does less job switching automatically mean the labor market is weakening?
No single conclusion should be drawn from quits alone. Fewer voluntary departures can reflect weaker outside opportunities, but industry composition, worker demographics, job stability and satisfaction with current employment may also affect the rate.
Turnover patterns also differ significantly across industries. Some service sectors normally experience frequent worker movement, while public-sector and professional positions may have lower turnover. Changes in the aggregate quits rate should therefore be compared with industry details and other labor indicators.
Why should quits be read together with openings and hiring?
One advantage of JOLTS is that it covers several stages of labor turnover at the same time, including openings, hires, quits, layoffs and other separations. Viewed together, these series provide information about both employer and worker behavior.
If openings decline, hiring slows and the quits rate also moves lower, both employer recruitment and voluntary worker movement may be cooling. If openings remain high, hiring is active and quits increase, labor-market mobility may be stronger.
Weekly unemployment claims provide another perspective on labor conditions. See How U.S. Initial Jobless Claims Affect Spot Gold Prices.
Why do precious-metals markets pay attention to quits?
Labor conditions affect expectations for economic growth, wage pressure, inflation and future interest rates. Payroll growth and unemployment describe important parts of employment conditions, while the JOLTS quits rate adds information about worker behavior and labor mobility.
If quits continue to cool while hiring, openings or wage indicators also weaken, markets may reassess whether labor demand and wage pressure are moderating. Those expectations can eventually influence bond yields, the U.S. dollar and gold.
The quits rate should therefore not be treated as a mechanical gold signal. Its more useful question is whether workers still have the willingness and ability to leave their current jobs. Combining that answer with other labor data gives a fuller picture. For a broader framework, see Precious Metals Trading: A Framework for High-Frequency Economic Data.