Churning Jobs Through 2010

Job churning—the voluntary movement of workers from one job to another similar job—is an important but seldom noted factor in the labor market. Churning creates badly needed job opportunities when growth slows and unemployment rises.

According to recent occupational projections, the Indiana Department of Workforce Development anticipates very slow growth from the first quarter of 2008 through the first quarter of 2010. Projected employment growth for the state is 0.9 percent, or 27,976 jobs. The forecast expects 216 of the 753 occupations for which projections are provided to decline. This forecast, it is important to note, was developed while the current recession was still taking shape; thus, it represents a best-case scenario of very modest growth in most occupations and declines in many others.

Fortunately, growth is not the only source of job opportunities. Job vacancies also occur when workers quit their jobs and leave the labor market. These may be retirees leaving the labor market for good or younger workers returning to school, starting a family, joining the military, etc. These create replacement job openings. Churning is another type of job vacancy, occurring when workers leave their current jobs to take similar jobs at other business establishments. Like decisions to quit, churning happens because of personal decisions rather than economic conditions.

Job turnover continues when the economy stagnates. Growth may fall to zero for a while, but job openings from replacement and churning never will. This is good news for job seekers because, from the workers' point of view, a job opportunity is just as real regardless of what caused it. The question is, how many job openings do replacement and churning create, and do those vacancies persist during a recession?

A partial answer is found in the Department of Workforce Development projections. DWD predicts only 27,976 jobs from growth, but 136,402 replacement job openings in Indiana from 2008 to 2010—that's nearly five job openings from replacement for each opening caused by growth. This estimate of openings due to replacement is still only part of the total job openings, since churning is yet unmeasured. 

The U.S. Census Bureau measured monthly job turnover of 6.4 percent during a three-year research study.¹ The study found total turnover varies from as low as 3.9 percent each month for managers to as high as 11.6 percent per month for farm laborers and 9.5 percent per month for service workers. That turnover rate includes all job changes. Churning, shown in the third column of Table 1, is a small part of total turnover, varying from only 6.5 percent of turnover to 16.5 percent. Note that a high churning rate does not necessarily mean high turnover, but only that intra-occupational churning represents a relatively large share of turnover for that occupation.

Table 1: Monthly Turnover and Churning in Indiana, 2008 to 2010

When the monthly rates for intra-occupational churning are converted to annual rates, they present quite substantial rates, from 6 percent for managerial workers to 13.7 percent among service workers. Applying these rates to statewide employment over a 24-month period provides us with an estimate of 609,339 job openings created by churning. Thanks to growth and replacement of workers who quit, Indiana expects 182,276 total job openings during the period covered by the forecast. When churning is added, the number rises to 791,615 job openings. 

Some readers will wonder if the source cited here is relevant since the research was conducted during a period of growth. Are workers less inclined to engage in churning during a recession? Evidence shows that the rate of job quits is not necessarily affected by recessions. For instance, the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey shows that even in the recessionary year of 2001, the annual rate of voluntary quits was 23.4 percent, or 30.8 million workers.² That is evidence of persistent turnover in a recession, even slightly higher than the 23.1 percent voluntary quits experienced in the growth year of 2005.

Jobs from replacement and churning are no substitute for long-term economic development and expansion. Churning is most common among lower-pay, lower-skill jobs—and the competition from experienced incumbent workers is stiffest when jobs are scarce. But churning provides hope to job seekers during the current downturn, since it is apt to continue even when growth stalls. Even in the occupations projected to stay flat or decline, job vacancies created by replacement and churning will continue. These opportunities are just as real as vacancies created by growth, and they will continue in the months to come regardless of how the economy behaves.

Notes

Andy Zehner, Director of Research
Indianapolis Private Industry Council