“…is partly a result of the significant rematching between employers and employees that happened at scale” after Covid.

By Wolf Richter for WOLF STREET.

In his Jackson Hole Speech, Fed Chair Warsh, when discussing the labor market, said: “In my view, the relatively low turnover in today’s labor market is partly a result of the significant rematching between employers and employees that happened at scale in the post-pandemic environment.”

He was referring to the huge historic wave of voluntary quits in 2021 and 2022, as labor shortages – due to people being slow to going back to work as they were receiving extra government money for not working – caused employers to raise wages and aggressively hire workers, including by poaching from other employers, and as employees saw opportunities everywhere and jumped jobs and industries.

The result of this huge churn in the labor market was that workers found jobs that better matched their aspirations and skills, and that employers found workers that were a better fit. And then everyone settled down, and the turnover calmed down.

Warsh’s “relatively low turnover” comment refers to data tracked by the “Job Openings and Labor Turnover Survey” (JOLTS) by the Bureau of Labor Statistics, which released the July data today. It tracks this “turnover” in the labor market; it doesn’t track employment growth, unemployment, etc.; the jobs report for July (released August 7) already did that.

Labor market turnover is a function of slots left behind by people who quit their jobs (“quits”); by people who got laid off or fired (“layoffs and discharges”); and by people who retired or separated for other reasons, such as died while employed (“other separations”). Those left-behind slots become “job openings” when employers try to fill them. And when employers successfully fill those job openings, they become “hires.” All these stages are tracked by the JOLTS data today.

Voluntary quits declined by 157,000 in July, to 3.06 million workers who walked out and quit their jobs voluntarily (blue in the chart). The three-month average rose to 3.14 million (red).

Quits account for 60% of total separations and are the biggest source of labor market turnover. Fewer quits mean fewer job openings left behind.

Layoffs & discharges declined to 1.67 million in July, down year-over-year by 106,000. Getting fired for a variety of reasons, or for no reason, is a standard feature of the US labor market.

The three-month average remained at 1.74 million. These levels are at the lower end of the range of the prepandemic years.

Layoffs and discharges accounted for 33% of all separations.

Retirements and other separations (including deaths while employed) accounted for only 7% of total separations. They’re only a small element in the turnover equation.

They rose to 350,000 in July. The 12-month average, which irons out the month-to-month spikes and plunges, rose to 314,000, further coming up from the 25-year low in 2025.

Job openings rose by 89,000 in July, to 7.27 million. The three-month average dipped by 105,000 to 7.33 million, up by 129,000 from a year ago.

The data for job openings is based on a survey of the HR departments of 21,000 business locations, not online job postings. A job is “open” only if it meets all three conditions:

1. A specific position exists, and there is work available for that position.
2. The job could start within 30 days.
3. The employer is actively recruiting workers from outside the establishment to fill the position.

Excluded are positions open only to internal transfers, promotions, demotions, or recall from layoffs; positions for which employees have been hired but have not yet started; and positions to be filled by employees of temporary help agencies, employee leasing companies, outside contractors, or consultants.

So with low number of quits, and low layoffs and discharges, the number of left-behind slots is low as well, showing the effects of lower labor turnover. This turnover has normalized at a level that is near the peak turnover in the years before the pandemic.

The number of hires to fill those fewer left-behind slots fell by 278,000 in July to 5.05 million. The three-month average declined to 5.21 million.

The number of hires is mostly a function of slots left behind by separations (quits, layoffs and discharges, and other separations). Nearly all of these 5.05 million hires filled slots left behind by previous separations. “Hires” do not speak to changes in payrolls, such as the number of jobs added to payrolls (reported by the employment report in early August), but mostly to “labor turnover.”

For employers, there were big costs associated with the massive labor turnover in 2021 and 2022, and measures of labor productivity declined from late 2020 through late 2022, as the large number of newly hired workers had to climb the learning curve. But after they settled in and learned the ropes, productivity rose to relatively high levels.

These dynamics were not signs of strengths or weaknesses in the labor market, but signs of a reshuffling of the labor market that resulted in a broadly better fit of workers and employers – as Warsh phrased it: “…the significant rematching between employers and employees that happened at scale in the post-pandemic environment.” It’s refreshing to see the Fed chair point that out, after Powell had been abusing this JOLTS data for years to support his views of strength or weakness in the labor market.

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