The U.S. unemployment rate fell to 6.7% in December 2013 as labor force participation dropped to 62.8%. Many are arguing that the unemployment rate is not an appropriate measure of labor market slack because of falling participation. However, an examination of the relationship between quit rates and the unemployment rate (data on quit rates only through October) suggests that people are quitting their jobs at the usual rate that would be associated with an unemployment rate at around 7% (December quit rate data comes out in early February). The relationship between job openings and the unemployment rate (the Beveridge Curve) has been extensively studied and currently the unemployment rate is high relative to job openings (leading to arguments about loops around the Beveridge Curve). Is anyone aware of labor-market research on quit rates and unemployment?
Update for November. The private sector quit rate held at 2.0%, which remains consistent with an unemployment rate of 7.0%. My feeling is anyone who says the 'true' unemployment rate is much higher might be right from a social policy perspective but not from a monetary policy one. Private sector economic agents are acting as if the effective slack in the labor market is 7.0%.
Farber (2011) Job Loss in the Great Recession: Historical Perspective
from the Displaced Workers Survey, 1984-2010, IZA n. 5686
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