Quits-to-Hires Ratio
The quits-to-hires ratio, derived from the Bureau of Labor Statistics JOLTS report, measures worker confidence in the labor market by comparing voluntary separations to new hires, serving as a leading indicator of wage growth, Fed policy sensitivity, and consumer spending durability.
The macro regime is late-stage stagflation transitioning toward deflation, but the transition timeline is compressed and uncertain by three competing forces: (1) a tariff/trade war escalation (45% probability) that partially re-ignites the inflation pipeline even as underlying demand decelerates; (2…
What Is the Quits-to-Hires Ratio?
The quits-to-hires ratio is a derived metric from the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey (JOLTS), calculated by dividing the monthly quits rate (voluntary separations as a percentage of total employment) by the hires rate (new hires as a percentage of total employment). It quantifies the degree to which workers feel confident enough to leave existing jobs relative to the rate at which employers are absorbing new workers.
A high quits-to-hires ratio signals a tight labor market from the employee's perspective: workers quit freely because they can find new jobs quickly, often at higher wages. A declining ratio signals the reverse—workers are staying put because job switching opportunities are deteriorating, a dynamic that presages slower wage growth and reduced consumer spending power. The ratio is distinct from either the raw quits rate or hires rate alone because it captures the relative balance of labor market power between workers and employers.
Why It Matters for Traders
The quits-to-hires ratio is one of the most powerful leading indicators embedded in the JOLTS dataset for anticipating wage-price spiral dynamics and Federal Reserve policy pivots. The Atlanta Fed's Wage Growth Tracker has historically tracked closely with the quits-to-hires ratio with a 2–4 month lag: elevated quit activity signals workers are commanding wage premiums by job-switching, feeding into nominal wage growth and ultimately services inflation—the component most scrutinized under the PCE services ex-housing framework.
For macro traders, a declining quits-to-hires ratio is a leading indicator of softening in wage growth before it appears in the Employment Cost Index or average hourly earnings data. This makes it particularly valuable for positioning in rate markets, as it can identify the turning point in the Phillips Curve dynamic before consensus registers the shift. A sustained decline typically supports duration-long positioning in front-end rates.
How to Read and Interpret It
- Ratio > 0.7: Historically elevated; characteristic of very tight labor markets. Associated with strong wage growth acceleration (2021–2022 regime showed ratios approaching 0.8–0.9).
- Ratio 0.55–0.70: Normal expansion territory; modest wage pressure, consistent with 3.5–4.5% annual wage growth.
- Ratio 0.40–0.55: Labor market cooling; wage growth deceleration likely in 2–4 months. Historically consistent with the post-2016 plateau.
- Ratio < 0.40: Recessionary signal; workers are not quitting, hires are slowing simultaneously. Associated with significant wage and inflation deceleration.
The ratio should be tracked on a 3-month moving average to remove seasonal distortions, and sector-level decomposition (particularly leisure/hospitality vs. professional services) provides additional signal quality.
Historical Context
During the post-pandemic labor market tightening of 2021–2022, the quits-to-hires ratio reached historically extreme levels. In November 2021, the JOLTS quits rate hit 3.0%—the highest ever recorded—while hires remained elevated but below quits, pushing the ratio above 0.85. This extreme reading was a precise leading indicator of the wage acceleration that followed, with the Atlanta Fed Wage Growth Tracker peaking near 6.7% year-over-year by mid-2022. Traders who monitored this signal were positioned for the Fed's aggressive taper and rate hike cycle well before consensus recognized the structural wage inflation dynamic.
By contrast, as the ratio declined from its 2022 peak toward the 0.55 range by late 2023, it correctly foreshadowed the deceleration in wage growth that gave the Fed room to signal eventual easing, consistent with a soft landing outcome.
Limitations and Caveats
The JOLTS data is released with a one-month lag and is subject to significant revisions, reducing its real-time utility. The ratio also conflates voluntary quits for better opportunities with quits for non-economic reasons (retirement, health), which can overstate worker bargaining power during demographic transitions. Additionally, in highly bifurcated labor markets, aggregate ratios mask important sector-level divergences—a declining aggregate ratio can coexist with continued wage acceleration in specific industries.
What to Watch
- Monthly JOLTS release: track 3-month moving average of quits-to-hires ratio against Atlanta Fed Wage Growth Tracker
- Divergence between aggregate ratio and leisure/hospitality sector ratio as a leading signal for services inflation
- Beveridge Curve shifts alongside quits-to-hires to assess structural vs. cyclical labor market rebalancing
- Fed Governor commentary explicitly referencing quits rate as a policy input signal
Frequently Asked Questions
▶How does the quits-to-hires ratio differ from just tracking the quits rate?
▶Can the quits-to-hires ratio predict Fed policy decisions?
▶What JOLTS data series do I need to calculate the quits-to-hires ratio?
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