What Happens When the Quits Rate Collapses?
What happens when the JOLTS quits rate collapses below 2.0%? Loss of worker confidence, wage growth deceleration, and recession risk implications.
Trigger: JOLTS Quit Rate falls below 2.0%
The Mechanics
The quits rate measures the percentage of the workforce voluntarily leaving jobs each month. It reflects worker confidence: people quit when they believe they can find better positions elsewhere. A quits rate above 2.5% historically signals a tight labor market with strong wage pressure, while a reading below 2.0% indicates workers are staying put, often out of caution about finding new employment.
Quits have a well-documented relationship with wage growth. When workers move between jobs, they typically secure 10-20% pay increases; when quits decline, this "job-switcher premium" compresses, lowering aggregate wage growth. The Atlanta Fed Wage Tracker and ECI both show strong correlations with the quits rate at 3 to 6 month lags.
A collapse in the quits rate typically precedes broader labor market weakness. Workers lose confidence before employers start layoffs, making quits a useful leading indicator of unemployment rate changes.
Historical Context
The quits rate peaked near 3.0% in late 2021 during the "Great Resignation" and normalized to roughly 2.1% by 2024. Pre-pandemic peaks were 2.4% in 2018-2019. Historical collapses include 2001 (2.4% to 1.7%), 2008-2009 (2.1% to 1.2%), and March 2020 (2.3% to 1.5%). In each case, wage growth decelerated within 2 to 4 quarters and unemployment rose.
Market Impact
Annual wage growth decelerates by 100-200 bps within 6 months of quits rate collapse.
Mixed near-term (lower wage pressure helps margins) but negative longer-term as consumer incomes slow.
XLY typically underperforms XLP by 5-10% over following year.
Bonds rally as inflation pressure eases and Fed shifts dovish. 10Y typically falls 30-80 bps.
Dollar weakens as expected Fed path shifts dovish.
Breakevens decline as wage-driven inflation expectations cool.
What to Watch For
- -Quits rate falling below 1.9%
- -Layoffs rate rising above 1.2% simultaneously
- -Atlanta Fed Wage Tracker declining below 4%
- -Unemployment rate rising 0.3% over three months
- -Job-switcher wage premium narrowing below 2%
How to Interpret Current Conditions
Track the quits rate alongside wage growth measures and consumer confidence. Declining quits plus rising layoffs mark inflection points in the labor cycle.
Per-Asset Deep Dives
Dedicated analysis of how this scenario affects each asset class individually.
Annual wage growth decelerates by 100-200 bps within 6 months of quits rate collapse.
Mixed near-term (lower wage pressure helps margins) but negative longer-term as consumer incomes slow.
XLY typically underperforms XLP by 5-10% over following year.
Bonds rally as inflation pressure eases and Fed shifts dovish. 10Y typically falls 30-80 bps.
Dollar weakens as expected Fed path shifts dovish.
Breakevens decline as wage-driven inflation expectations cool.
When the Quits Rate Collapses, VIX Index typically responds to the changing macro environment. CBOE Volatility Index, the "fear gauge" measuring S&P 500 expected volatility. This scenario is particularly relevant for volatility because changes in JOLTS Quit Rate directly influence the macro environment for VIX Index. Investors should monitor both the trigger condition and VIX Index's response to position accordingly.
When the Quits Rate Collapses, EM Dollar Index typically responds to the changing macro environment. Dollar index weighted by emerging-market trading partners. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for EM Dollar Index. Investors should monitor both the trigger condition and EM Dollar Index's response to position accordingly.
When the Quits Rate Collapses, EUR/USD typically responds to the changing macro environment. Euro to US dollar exchange rate. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for EUR/USD. Investors should monitor both the trigger condition and EUR/USD's response to position accordingly.
When the Quits Rate Collapses, JPY/USD typically responds to the changing macro environment. Japanese yen to US dollar exchange rate. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for JPY/USD. Investors should monitor both the trigger condition and JPY/USD's response to position accordingly.
When the Quits Rate Collapses, CNY/USD typically responds to the changing macro environment. Chinese yuan to US dollar exchange rate. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for CNY/USD. Investors should monitor both the trigger condition and CNY/USD's response to position accordingly.
When the Quits Rate Collapses, BRL/USD typically responds to the changing macro environment. Brazilian real to US dollar exchange rate. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for BRL/USD. Investors should monitor both the trigger condition and BRL/USD's response to position accordingly.
When the Quits Rate Collapses, Real Effective Exchange Rate typically responds to the changing macro environment. BIS real effective exchange rate for the US dollar, inflation-adjusted competitiveness. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for Real Effective Exchange Rate. Investors should monitor both the trigger condition and Real Effective Exchange Rate's response to position accordingly.
When the Quits Rate Collapses, Trade Balance typically responds to the changing macro environment. US trade balance in goods and services, negative = trade deficit. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for Trade Balance. Investors should monitor both the trigger condition and Trade Balance's response to position accordingly.
When the Quits Rate Collapses, Nasdaq 100 ETF (QQQ) typically tends to rally on improved liquidity conditions. Invesco QQQ tracking the Nasdaq 100, tech-heavy growth index. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Nasdaq 100 ETF (QQQ). Investors should monitor both the trigger condition and Nasdaq 100 ETF (QQQ)'s response to position accordingly.
When the Quits Rate Collapses, Dow Jones ETF (DIA) typically tends to rally on improved liquidity conditions. SPDR Dow Jones Industrial Average ETF, tracks the 30 blue-chip Dow components. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Dow Jones ETF (DIA). Investors should monitor both the trigger condition and Dow Jones ETF (DIA)'s response to position accordingly.
When the Quits Rate Collapses, Russell 2000 ETF (IWM) typically tends to rally on improved liquidity conditions. iShares Russell 2000 ETF, small-cap equity benchmark. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Russell 2000 ETF (IWM). Investors should monitor both the trigger condition and Russell 2000 ETF (IWM)'s response to position accordingly.
When the Quits Rate Collapses, S&P 500 Equal Weight (RSP) typically tends to rally on improved liquidity conditions. Equal-weight S&P 500, measures market breadth vs cap-weighted SPY. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for S&P 500 Equal Weight (RSP). Investors should monitor both the trigger condition and S&P 500 Equal Weight (RSP)'s response to position accordingly.
When the Quits Rate Collapses, Emerging Markets (EEM) typically tends to rally on improved liquidity conditions. iShares MSCI Emerging Markets ETF. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Emerging Markets (EEM). Investors should monitor both the trigger condition and Emerging Markets (EEM)'s response to position accordingly.
When the Quits Rate Collapses, China Large-Cap (FXI) typically tends to rally on improved liquidity conditions. iShares China Large-Cap ETF, proxy for Chinese equity market. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for China Large-Cap (FXI). Investors should monitor both the trigger condition and China Large-Cap (FXI)'s response to position accordingly.
When the Quits Rate Collapses, EAFE Developed (EFA) typically tends to rally on improved liquidity conditions. iShares MSCI EAFE ETF, developed markets excluding US and Canada. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for EAFE Developed (EFA). Investors should monitor both the trigger condition and EAFE Developed (EFA)'s response to position accordingly.
When the Quits Rate Collapses, Germany / DAX (EWG) typically tends to rally on improved liquidity conditions. iShares MSCI Germany ETF, proxy for the DAX and German equity market. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Germany / DAX (EWG). Investors should monitor both the trigger condition and Germany / DAX (EWG)'s response to position accordingly.
When the Quits Rate Collapses, Japan / Nikkei (EWJ) typically tends to rally on improved liquidity conditions. iShares MSCI Japan ETF, proxy for the Nikkei 225 and Japanese equity market. This scenario is particularly relevant for equity index because changes in JOLTS Quit Rate directly influence the macro environment for Japan / Nikkei (EWJ). Investors should monitor both the trigger condition and Japan / Nikkei (EWJ)'s response to position accordingly.
When the Quits Rate Collapses, 7-10Y Treasury (IEF) typically rallies as rate expectations decline. iShares 7-10 Year Treasury Bond ETF. This scenario is particularly relevant for bonds & duration because changes in JOLTS Quit Rate directly influence the macro environment for 7-10Y Treasury (IEF). Investors should monitor both the trigger condition and 7-10Y Treasury (IEF)'s response to position accordingly.
When the Quits Rate Collapses, 1-3Y Treasury (SHY) typically rallies as rate expectations decline. iShares 1-3 Year Treasury Bond ETF, short duration. This scenario is particularly relevant for bonds & duration because changes in JOLTS Quit Rate directly influence the macro environment for 1-3Y Treasury (SHY). Investors should monitor both the trigger condition and 1-3Y Treasury (SHY)'s response to position accordingly.
When the Quits Rate Collapses, TIPS (TIP) typically rallies as rate expectations decline. iShares TIPS Bond ETF, inflation-protected Treasuries. This scenario is particularly relevant for bonds & duration because changes in JOLTS Quit Rate directly influence the macro environment for TIPS (TIP). Investors should monitor both the trigger condition and TIPS (TIP)'s response to position accordingly.
When the Quits Rate Collapses, US Dollar Bull (UUP) typically responds to the changing macro environment. Invesco DB US Dollar Index Bullish Fund. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for US Dollar Bull (UUP). Investors should monitor both the trigger condition and US Dollar Bull (UUP)'s response to position accordingly.
When the Quits Rate Collapses, GBP/USD (FRED) typically responds to the changing macro environment. GBP/USD exchange rate from FRED. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for GBP/USD (FRED). Investors should monitor both the trigger condition and GBP/USD (FRED)'s response to position accordingly.
When the Quits Rate Collapses, GBP/USD typically responds to the changing macro environment. GBP/USD spot rate from Yahoo Finance. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for GBP/USD. Investors should monitor both the trigger condition and GBP/USD's response to position accordingly.
When the Quits Rate Collapses, EUR/GBP typically responds to the changing macro environment. EUR/GBP spot rate. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for EUR/GBP. Investors should monitor both the trigger condition and EUR/GBP's response to position accordingly.
When the Quits Rate Collapses, CAD/USD typically responds to the changing macro environment. Canadian dollar per US dollar. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for CAD/USD. Investors should monitor both the trigger condition and CAD/USD's response to position accordingly.
When the Quits Rate Collapses, MXN/USD typically responds to the changing macro environment. Mexican peso per US dollar. This scenario is particularly relevant for fx & dollar because changes in JOLTS Quit Rate directly influence the macro environment for MXN/USD. Investors should monitor both the trigger condition and MXN/USD's response to position accordingly.
Frequently Asked Questions
What triggers the "the Quits Rate Collapses" scenario?▾
The scenario activates when falls below 2.0%. The trigger metric and its current reading are shown on this page, so the live state of the scenario is always visible rather than abstract. Convex tracks this trigger continuously and flags crossings within hours.
Which assets are most affected when this scenario unfolds?▾
The Market Impact section lists the full asset-by-asset response, but the primary affected assets include: Wage Growth, US Equities (S&P 500), Consumer Discretionary, Treasury Bonds (TLT). Each asset has historically shown a characteristic pattern of response that is described in detail on the per-asset deep-dive pages linked below.
How often has this scenario played out historically?▾
The quits rate peaked near 3.0% in late 2021 during the "Great Resignation" and normalized to roughly 2.1% by 2024. Pre-pandemic peaks were 2.4% in 2018-2019. Historical collapses include 2001 (2.4% to 1.7%), 2008-2009 (2.1% to 1.2%), and March 2020 (2.3% to 1.5%). In each case, wage growth decelerated within 2 to 4 quarters and unemployment rose.
What should I watch for next?▾
The most important signals to track while this scenario is active: Quits rate falling below 1.9%; Layoffs rate rising above 1.2% simultaneously. The full list is on this page under "What to Watch For." These signals are the ones that historically preceded the scenario either resolving or accelerating.
How should I interpret the current state of this scenario?▾
Track the quits rate alongside wage growth measures and consumer confidence. Declining quits plus rising layoffs mark inflection points in the labor cycle.
Is this a prediction or a conditional analysis?▾
This is conditional analysis, not a prediction that the scenario will happen. Convex describes what typically follows once the trigger fires and shows how close or far the current data is from that trigger. The page is informational; it does not constitute financial advice.
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This content is educational and for informational purposes only. It does not constitute financial advice. Historical patterns do not guarantee future results. Data sourced from FRED, market feeds, and public economic releases.