“Compelling evidence that labor markets are pretty tight”

Evan Soltas has a great post showing that employees are quitting their jobs more frequently than you would expect, if the labor market is as tepid as some of us think.

I’ve been extremely skeptical that the unemployment rate is a good measure of the health of the labor market, since it doesn’t take into account those who’ve given up looking for work or just stopped working. See Calculated Risk’s posts on the labor force participation rate vs. the unemployment rate.

But Soltas makes a good case – based on the quitting rate – that my (and his) skepticism was possibly misplaced:

“If the long-term unemployed are disconnected from the labor market, they really can’t matter much in a macroeconomic sense — that is, their unemployment no longer has the power to restrain wage growth or discourage the employed from quitting and switching jobs.”