WSJ: Workers Stay Put, Curbing Jobs Engine

From the Wall Street Journal online:

Gridlock in Washington delayed last week's jobs report. But blame gridlock of a different kind for holding back the job market itself....

Even when the numbers are released, however, there is a strong argument that they aren't the most important gauge of the health of the labor market, at least right now. That's because the headline figure measures net growth—all the new jobs that were created in a month minus all the ones that were destroyed....

But focusing on net growth masks what's going on beneath the surface—or rather, what isn't going on. Workers aren't quitting their jobs to pursue better opportunities. Companies aren't filling positions when they do open up.

Economists refer to job turnover that doesn't change the overall number of employees at a company as "churn." In normal times, churn dwarfs job creation and destruction, as millions of workers resign or are fired and are replaced. By a wide array of measures, however, rates of churn remain far below normal...

Churn doesn't get as much attention as new-job creation, but to people looking for work, it's just as important. The unemployed don't care whether the jobs they're applying for are new positions or were vacated by other workers. In fact, they may have a better chance at landing pre-existing jobs: Economic research suggests companies tend to be pickier when filling new positions, which tend to be more discretionary. When fewer people quit their jobs, there are fewer opportunities for the unemployed to come in behind them.

"Nobody's leaving for a better job," said Jason Faberman, an economist at the Federal Reserve Bank of Chicago. "These guys aren't moving on to better jobs, which means their positions aren't opening up for the unemployed."

...Nor is it just the unemployed who suffer from reduced turnover. Changing jobs is one of the most important sources of wage growth, particularly for younger workers. With unemployment for those under age 25 still elevated at 15.6%, many of those lucky enough to have jobs are playing it safe by staying put—and as a result may put themselves at a permanent earnings disadvantage.

"If you miss that window when you're young, that could have really long-term consequences," said Toshihiko Mukoyama, a University of Virginia economist. "They cannot go up the job ladder."

That kind of ladder-climbing doesn't just matter to individual workers. Churn acts like a kind of grease in the economy's gears, helping workers move to jobs that are a better fit for their skills and helping to shift workers away from poor-performing companies and toward better ones. Recessions slow that process, making the economy as a whole less productive.

"People are getting stuck" at less productive companies, said Lisa Kahn, a Yale University economist. "That very likely has consequences even after the recovery."
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Link: http://online.wsj.com/article/SB10001424052702303492504579113703779249002.html