Fun With Statistics

by Luke Greiner
April 2016

The Unemployment rate has been falling in Minnesota since 2009 as businesses expand and the unemployed labor pool is put back to work. Attracting new workers has become a concern for many businesses. Although it’s easy to understand that as the unemployment rate falls there are fewer workers available to fill new vacancies relative to labor force growth, turnover also changes with the economic climate.

Turnover rates measured by the Bureau of Labor and Statistics capture the average rate of hires and separations within a firm. What’s interesting is how correlated the turnover rate is with the unemployment rate. Generally speaking, turnover has an inverse relationship with unemployment rates, meaning that as the rate of unemployment decreases, the turnover rate increases.

The latest Quarterly Workforce Indicator data from the U.S. Census Bureau’s Longitudinal Employer-Household Dynamics Program (LEHD) show Minnesota’s turnover rate across all industries had increased to 9.7 percent by 2014, relatively low compared to the 12.2 percent experienced in 1998. Our current turnover rate is also the same rate experienced during the trough between the 2001 recession and the 2007 recession.

While turnovers are seen as a challenge by many, especially employer, workers who voluntarily change jobs often receive significant wage boosts. Delineating turnover rates by demographic categories suggests that workers who often face the largest employment disparities are taking full advantage of the current economic expansion, becoming more mobile and possibly attaining better jobs.

Turnover is also related to the age of firms. The youngest firms (0-1 years) have the highest turnover, but the rate has remained somewhat flat over the last 20 years. Older firms reflect the overall turnover trend more accurately and maintain lower turnover rates.