The Great Resignation is causing 'structural changes' to the workforce, BofA says

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The Great Resignation is causing 'structural changes' to the workforce, BofA says
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  • Quitting is the latest hot trend in the US labor market, with workers leaving at near record highs for months.
  • The Great Resignation shows no signs of slowing, and BofA says labor force participation may remain low for years.

In case you haven't heard, quitting is so hot right now. No, really, nearly 3% of the workforce quit in August, with 4.3 million people throwing in the towel. It's the fifth straight month of near-record quits, a trend that shows no signs of slowing.

Organizational psychologist Anthony Klotz, who coined the term the "Great Resignation" in the spring, told Insider that he'd thought of the term as a description to his wife of what he thought would happen as the economy began to reopen and people began to rethink what they wanted out of work.

Bank of America Research economists Michelle Meyer and Stephen Juneau are projecting real sticking power for this Great Resignation, too. They forecast labor force participation - which tracks people who are either working or actively working - will go up to 62.6% by the end of 2022, but then it will "hold there" in 2023. That means the labor force participation would stay below the pre-prepandemic rate of 63.3%.

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That might sound like a small difference, but it constitutes one of several "structural changes to the workforce" being created by the Great Resignation, Meyer and Juneau maintain, also citing the record number of quits by workers.

In September, the labor force participation rate was 61.6%, a slight dip from 61.7% in August.

A recent survey by job search site Joblist found that, of 2,099 respondents, 73% were considering quitting - with a quarter saying that they feel comfortable leaving without a new role waiting for them. Restaurant and hotel workers took that to heart in August, with 6.8% quitting. That's 892,000 workers leaving.

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That's likely one reason that the current labor shortage is persisting, especially as workers rethink what they want out of work - and find that their current roles' compensation and conditions are lacking.

Wages are going up as a result

This "extreme churn in the labor force," in the words of BofA, has led to "rapid wage growth." Indeed, wages have grown consistently over the past few months - by 0.6% in September, more than forecast, and by 4.6% year-over-year. The rate of wage growth is even higher for workers in leisure and hospitality, going up by 10.8% year-over-year.

BofA tracking also shows that lower-earning workers are more likely to quit - as seen in the rapid rate of departures from industries like leisure and hospitality. Significantly, data on quits doesn't say whether workers are job-switching or moving into higher-paying roles, but research from the Federal Reserve Bank of Chicago found a "remarkably strong relationship" between jobs switches and higher pay.

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As Insider previously reported, that means the radical shifts in the labor market could be queueing America up for a stronger economic recovery than ever. Quitters will likely make more - and be more productive - and companies might learn how to adjust to better meet workers' needs.

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