With Record Rates of Resignation, Expect More Delays on New Housing
The Great Resignation — the name given to the enormous wave of workers quitting their jobs over the past year — is making headlines nationwide as the number of workers quitting their jobs continues to rise. Around 33 million Americans have quit their jobs since the spring of 2021.
The largest spike in resignations came in September 2021, when 4.4 million workers quit their jobs, up from 4.3 million in August.
But why now, and what does this mean for California as a whole?
Why Are Americans Leaving Their Jobs?
To understand why Americans are quitting their jobs, we need to look at what factors are pushing workers to walk away:
- For workers who are parents, childcare can be hard to find and expensive. It’s been difficult for parents to find childcare, as unpredictable school closings persist during the pandemic.
- Generational workers are impacting employment numbers. The decision by older, sometimes immune-compromised folks face a higher risk regarding COVID-19, which has pushed many of these individuals to retire early and permanently leave the workforce.
- Saving money continues to be a struggle, particularly for employees making minimum wage. On average, Americans with incomes in the bottom 60% received $3,450 from stimulus payments. Some workers were able to allocate this money to savings, allowing them the luxury of being more particular about their employment. That could mean using the money to leave jobs that were unfulfilling or undervaluing their skill sets.
- Leverage is the biggest factor. The growing desperation of employers has caused them to offer more generous wages and benefits to new workers, prompting many to quit their previous lower-paying jobs in favor of something better.
As the number of workers quitting continues to rise, so does the number of job opportunities. A more fitting name for this Great Resignation would be the Great Renegotiation as employers will need to step up and compete for workers.
“It is a sign of health that there are many companies that are looking for workers — that’s a great sign,” said Ben Ayers, senior economist at Nationwide, in an interview with The Washington Post. “The downside is there are many workers that won’t come back in. And long term you can’t sustain a labor market that’s as tight as it is right now.”
How Is the Great Resignation Impacting California’s Real Estate Market?
In California, the resignation rate is 2.5%, which is just below the national average of 3.0%. According to the state’s Employment Development Department, there were roughly 699,727 active job openings as of December 2021.
While not directly related to real estate, the impact of Californians leaving their jobs will have a ripple effect that extends into our industry. The labor shortage has hit construction hard, causing delays in residential and commercial construction, which was already experiencing delays during the peak of the pandemic.
This labor shortage has hit construction hard, which will aggravate existing delays and increased costs associated with residential and commercial construction. The price for construction resources related to residential real estate rose by 14.5% throughout 2021.
Without workers, delays in home construction will continue to rise, which will affect housing inventory that’s already well below the demand in the state. Naturally, a lack of housing will cause home prices to rise, which has been an ongoing concern in California. Currently, the median home value in California sits at $734,612, more than double the nation’s average of $320,662.
How Is the Great Resignation Impacting California?
According to the U.S. Bureau of Labor Statistics, California’s unemployment rate was 7.5% in November 2021, boasting 1,155,000 job openings with 1.23 unemployed persons per job opening. Tourism is a crucial factor in California’s economic health, and the highest resignation rate has centered on the leisure and hospitality industries. Nationally, around 6.9% of people working in hotels, bars, and restaurants have quit their jobs. A graph below illustrates the quit rate by industry for November 2021 alone:
The Great Resignation comes at a pivotal time as businesses scramble to regain the revenue they lost during the COVID-19 pandemic. Americans are beginning to spend on services again and traveling more outside of their home states.
Beyond the impact on the real estate market, a low labor force impacts the economy as a whole. A low employment rate means that the economic foundation of the state is weak. For individuals without a job, this means they will not have a steady income, which leaves them living off their savings, which is not sustainable.
As of September 2021, the average personal saving rate in the U.S., which is the ratio of personal saving to disposable personal income, was 7.3%. For perspective, the average personal saving rate in April 2020 was 33.8%. Going back further, the average personal saving rate in December 2018 was 9.0%.
Find more statistics at Statista
Thankfully, this data shows us that the current rate is critically low, but it’s also an indicator that the average American does not have significant savings to fall back on, which is especially concerning if they’re not employed.
The CE Shop readers: How do you see the Great Resignation impacting your careers? Have any of your clients (current or previous) quit their jobs? Are agents within your sphere quitting in pursuit of other opportunities? Let us know in the comments below!