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Little Room for New Workers

Wall Street Journal (02/08/12) Ben Casselman

Although the U.S. job market is showing signs of improvement, the churning process has slowed, with a new report showing a drop in the number of workers who quit their jobs in December to fewer than two million from a prerecession level of about three million per month. Churn usually is indicative of a strong economy, with workers leaving their jobs to accept another with higher pay and more responsibilities and allowing a new worker to take their place, but experts say people do not want to take a chance on a new job in the current economy. When employees do quit, companies are worried about the risks of hiring new workers and look first to fill the open positions with existing personnel. This means that new graduates, unemployed workers, and employees from other companies have fewer opportunities for employment, and the economy is less efficient when workers do not move to new jobs that are a better fit.

In the short term, University of Chicago economist Steven Davis says reduced churn will put a damper on the efforts of unemployed workers to find jobs, but the long-term consequences are unknown. However, experts say an improving economy means companies and workers will increase their appetites for risk.