Churn is a measure of job turnover of a particular type: workers leaving one job in favor of another (usually a better one and usually in another company), while other workers are hired to fill the just-created vacancy. The net result is the same level of employment as before, hence “churn” rather than “new hires.”
In the time before the Panic of 2008—2007, for example—churn was working to the tune of 3 million workers per month: 3 million workers would quit their present job and go to another job to work. Last July, that number was 2.3 million. The churn isn’t churning.
The reasons this drop in churn rate matters include these two items: the job just left is an existing one, and the employer knows its value, especially compared to a new job the employer created as a result, for instance, of an expansion in that company’s production capacity or sales demand. That existing job, as a known quantity, is more accessible to an unemployed worker or a worker in an existing, “lesser,” job in another company. The newly created positions, as somewhat of an unknown, get more pickiness from the employer if for no other reason than that the employer does not have to fill the new position as much as he needs to fill the now-empty existing one.
The other reason churn matters has to do with why the workers are leaving their existing jobs. These folks generally are looking for, or have found, better ones. The import of this is in Jason Faberman’s (a Federal Reserve Bank of Chicago economist) comment about the sharp drop in churn rate:
Nobody’s leaving for a better job. These guys aren’t moving on to better jobs, which means their positions aren’t opening up for the unemployed.
The better jobs aren’t there, it’s hard to move with a mortgage that makes it hard to sell a home, there’s little confidence in getting a new job somewhere else—the job actually has to be in hand—the reasons for the lack of departures are varied, but they all aggregate to the same outcome: the upward mobility that has been one of the engines of American prosperity generation is being destroyed.
Ben Casselman, writing in The Wall Street Journal at the above link, expanded on that:
Changing jobs is one of the most important sources of wage growth, particularly for younger workers. With unemployment for those under age 25 still elevated at 15.6%, many of those lucky enough to have jobs are playing it safe by staying put—and as a result may put themselves at a permanent earnings disadvantage.
“If you miss that window when you’re young, that could have really long-term consequences,” said Toshihiko Mukoyama, a University of Virginia economist. “They cannot go up the job ladder.”
And that’s an outcome of the Obama Recovery from the Panic.