The economic recovery from the 2020 recession presently remains out of reach. But unlike the recovery from the 2008 recession when jobs were scarce, today’s recovery is upside down, driven by the Great Resignation of workers who are fed up with poor working conditions and ready to demand a change.

The number of workers quitting their jobs continues to escalate in 2021. September 2021 saw the highest number ever, with 4.4 million workers quitting nationwide in this single month. For perspective, this was up from 4.3 million a month earlier and 3.3 million a year earlier, according to the Bureau of Labor Statistics (BLS).

Typically, workers are less likely to quit during times of economic distress, such as during a recession or during the immediate recovery period following a recession. That’s because they are less certain about the ability to find a new job, and thus are more likely to stay even when poor working conditions leave them dissatisfied in their work.

In 2021, even with the 2020 recession still fresh in our minds and the effects still wreaking havoc on the supply chain and inflationary metrics, many employers are struggling to find workers to fill openings. They are offering signing bonuses, above-minimum wages and other perks. With 10.4 million job openings in September 2021, it’s no wonder the 4.4 million workers who quit this month were confident in their ability to find another job. For reference, before the pandemic, the highest number of job openings seen in the U.S. was 7.6 million openings, according to the New York Times.

Why are workers quitting in droves, and why do job openings persist? A number of factors are pushing workers to demand more from their workplaces, including:

  • the continued difficulty in finding childcare as unpredictable school closings persist during the pandemic;
  • the decision by older, sometimes immune-compromised, at-risk individuals to retire early and permanently leave the workforce;
  • the ability to grow savings during the pandemic following the multiple rounds of individual stimulus payments, allowing workers the luxury to be more particular and wait for the right job; and
  • the growing desperation of employers, causing them to offer more generous wages and benefits to new workers, prompting many to quit their old, lower-paying jobs.

The building disaster of low labor force participation

Here in California, just over one million jobs are still missing from the labor market as of September 2021. However, there are roughly 650,000 active job openings, according to the state’s Employment Development Department.

For real estate, the labor shortage has hit construction particularly hard. Even before the pandemic upended everyone’s lives, the construction worker shortage caused delays and higher costs for builders. Now, on top of the building material shortage, the lack of workers has held back new construction even more.

Related article:

Supply chain disruptions threaten California’s housing market

Without more workers, construction will continue to fall below what is needed to meet demand, worsening the inventory shortage which has caused home prices to skyrocket out of reach for most first-time homebuyers. Further, insufficient construction has also pushed rents to increase faster than wages, worsening quality of living standards and contributing to California’s worsening homelessness crisis.

Outside of our ongoing housing shortage, the low labor force participation (LFP) rate has broader economic implications. A low LFP rate is a sign of a weak economic foundation. Without a steady stream of income, households are at the mercy of their savings, which are not infinite. Eventually, workers will need to return to work, or else move in with relatives and contribute less to the economy.

Many of the workers who left the labor force during the pandemic were women. Instead of earning income, they became responsible for the care of children and elderly relatives. This is problematic for individual household incomes, and it’s also detrimental for the economy as a whole.

Since the 1970s when women began working outside the home in greater numbers, household income has continuously climbed. In real terms, household income has increased 21% from 1979 to 2018, accord to Brookings. As women make up a disproportionate share of now-jobless workers in 2021, expect to see household income measures — and economic participation — decline.

Real estate professionals: how do you see the Great Resignation playing out in your careers? Are more of your clients quitting their jobs? Or are colleagues pursuing other careers outside of real estate? Share your experience with other readers in the comments below.

Related article:

The labor force participation rate rebounds slowly, with poor implications for real estate