If you follow the monthly numbers from the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics (BLS), you are in good company: Federal Reserve Chair Jerome Powell is closely tracking them as well.

Of particular interest to Powell and economists, especially since the U.S. climbed out of the pandemic’s depths, has been the number of workers quitting their jobs (those who leave voluntarily) and the number of job openings at employers. 

As Powell said at his January 26 press conference, “If you look at surveys of workers, they find jobs plentiful. Look at surveys of companies; they find workers scarce. And all of those readings are at levels really that we haven't seen in a long time and, in some cases, ever. So, this is a very, very strong labor market.”

A constrained labor supply, as CFOs well know, usually means a business has to pay higher wages for the same job, increasing operating costs. Wages and salaries for civilian workers shot up 4.5% in the fourth quarter compared with a year ago, according to the BLS, the largest gain since 2001.

The raw labor turnover numbers reveal the worker movements underlying the tight market. Just as job openings (demand) rise, more workers (supply) are leaving their jobs. The rising number of “quits” — 4.5 million in November 2021 — has posed a mystery to some economists. But regardless of why workers are willing or able to walk out the door, quits (added to the other normal cyclical job separations, like layoffs) have stalled U.S. employment growth.

The other part of the jobs equation is that so far people on the job sidelines are staying there for the most part, as the labor force participation rate languishes.

Is this the beginning of a structural problem arising from the U.S. population’s aging and more workers retiring? Powell thinks some workers are waiting on a more certain end to COVID-19 before they re-enter the market. And, though Powell didn’t say this, some of those job-leavers might decide they need a paycheck again. That’s in part why Powell believes the economy has yet to reach labor market conditions consistent with maximum employment.

If we’re looking on the bright side, the employment numbers give the Federal Reserve Open Market Committee some wiggle room. It can be less accommodative on monetary policy and tighten financial conditions without “severely undermining” the job market, Powell said.