Economy Regaining Dynamism After Drought

In a post at AEI, Jim Pethokoukis said that this rise in job tenure was “another sign of America’s declining dynamism.” The trends through 2014 are indeed troubling, as they are indicative of a less dynamic economy where too many workers are rooted in place, pessimistic about their prospects of moving to a better, potentially more productive job.
However, the most recent data from the Department of Labor finds a pickup in labor turnover after 2014.
Source: Department of Labor, “Employee Tenure in 2016.” The share of workers with tenure of five years or more has fallen back to under 48 percent, to some extent reversing the recent surge documented by the Census report.
After falling as low as 1.3 percent in some months of 2009 and 2010, the quits rate has recovered and remained above 2.0 percent since June 2015.
Over the past year it has inched even higher, at or above 2.1 percent in every month.
After increasing for almost a decade, job tenure has declined in recent years.
Job switching is related to the churn rate of new firms, and the recent reduction in median job tenure could be some of the first tentative signs that a measure of dynamism could be returning to the economy as it finally gets out from the long shadow of last decade’s recession.
Firm age was the other major explanatory factor identified in the report, explaining between 37 and 50 percent of the increase in job tenure of five years or more.
The reversal of that trend is a sign that dynamism and the labor market are recovering.
If the trends of the past few years continue, median job tenure returning to pre-recession levels would be a sign of reduced complacency and an increased appetite for risk-taking.

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