The Employment Migration
Covid shut down a lot of businesses, at least temporarily. Many are now re-opened, and many large businesses are nearly back to normal operations. Nonetheless, the recovery in employment has lagged. October jobs numbers reflected further growth, but compared to February 2020 the economy still has 1.7 million fewer jobs. The unemployment rate also remains higher than it was pre-pandemic, at 4.6% rather than 3.5%.
Despite this, the market has responded positively to the recovery in employment that has occurred, with stock prices recently hitting all-time highs. Concerns over inflation continue to take a back seat to optimism about economic recovery, as well as positive corporate earnings growth. Questions persist, however, about whether the economy will sustain growth if employment hasn’t fully recovered — and the wave of resignations clouds the picture.
The Great Resignation
The number of US workers voluntarily leaving their jobs surged to a record in September of 4.4 million (out of a total separations figure of 6.2 million). The “quit rate” also hit an all-time high of 3%.1 Where are all these people going?
The pandemic pushed some people out of their jobs or forced them to work from home for the first time, including a disproportionate number of women. The upheaval in work led many families to reconsider their priorities. Concerns about their children’s needs, remote work options, passion projects, and the ongoing health threats that the pandemic made a daily consideration led great swaths of workers to reconsider their employment.
Some are looking for a different job in which they can work remotely on a regular basis. Others are looking for better pay and better working conditions. Some are re-evaluating their careers and looking for a change. The number of women applying to business school — often an indicator of a new or different career intention — hit an all-time high this year: fully 41% of the 2021 incoming MBA classes at US schools are women.2
Whether seeking early retirement, deciding to be closer to family, or simply looking for more space, better weather, or a lower cost of living, some people leaving their jobs are also moving geographically. Reducing stress has been a huge motivator and many people are deciding to reject the sacrifices once deemed necessary long commutes, relocating or traveling for work, or being available for work in the evening and on weekends. They are more deliberate about work-life balance, with the intention that work should accommodate life — and not the other way around.
Hidden in Plain Sight
One question that has been hotly debated as pandemic unemployment programs ended in recent months has been, if there are still millions of people unemployed, why is it so hard to find people to fill jobs? We are all familiar with the press to hire in restaurants and other service businesses, but where are the workers? Many are choosing to start new businesses.
Historically, new business formations have been quite steady between 200,000 and 300,000 monthly; for the year ending May 2021, that pace more than doubled. These numbers are one indicator of the transformation ushered in by the pandemic, and opportunities that fiscal and monetary support has created.
Small businesses are a primary source of job creation, so this dramatic increase in business formation may well be a hidden driver of the rapid recovery of jobs following the early pandemic shutdowns. New businesses contribute to innovation and improved productivity as well, assuming they thrive over time.3 The numbers hint that many people who left the labor force aren’t coming back anytime soon because they are now running their own small businesses.
There is also a geographic element to the migration from wage employment to business ownership. New business formation is up in nearly every state, but it is most concentrated in the southeast. This may reflect people seeking better weather and lower living expenses; it may also help address an area that, despite recent growth in both service and manufacturing businesses, has many states with very high poverty rates.
Next Steps into Normal
Progress continues on eliminating Covid restrictions in business and in our personal lives. Children are now getting vaccinated, and many areas are back to low rates of infection. The chair of the UCSF department of medicine recently commented that in many areas the risks of Covid are similar to the seasonal flu. Its risks are no longer the outsized risks of a deadly, fast-moving virus, but the risks of day-to-day life.
For investment portfolios and financial decision-making, new opportunities exist for considering life changes even as we recognize that the typical risks remain. Periodic declines in stock prices will create temporary downdrafts in invested wealth, and personal considerations will shape day-to-day spending choices. Beyond the pandemic, transformation will continue, and we’ll work with you to navigate the changes as they arise.
 Jonathan Garber, “A Record 4.4M Americans quit jobs as ‘Great Resignation’ gathers momentum,” Fox Business, updated November 12, 2021. See also in-depth JOLTS data (Job Openings and Labor Turnover Summary) at the US Bureau of Labor Statistics.
 Arianne Cohen, “How to Quit Your Job in the Great Post-Pandemic Resignation Boom,” Bloomberg Businessweek, May 10, 2021.
 Dave Rosenberg, “What Has Happened with Business Formation and Destruction,” in Breakfast with Dave, October 29, 2021.
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