Tuesday, July 28, 2015

Explore Utah's Changing Turnover Rates


Matt Schroeder, Regional Economist

In the business community, turnover is typically regarded as an eight-letter-word. That is… two four-letter-words in rapid succession. High turnover rates generally increase costs, slow productivity, and hurt a company’s bottom-line. But from a broader economic standpoint, increasing turnover can be a sign of economic health. 

Contrary to what one might think, there was considerably less turnover during the recession then prior to it. This is because the majority of turnover is not driven by layoffs but rather by workers voluntarily changing their jobs, which is more likely to happen in good economic times, when more opportunities exist. In times of economic hardship, opportunities are fewer, so individuals are less likely to give up their jobs for new ones and the turnover rate falls.  

During the recession in Utah, the average quarterly turnover rate fell from 12% in 2007 to about 9% in 2009. Since that time, Utah’s quarterly turnover rate has crept its way back up to about 10% but is still below pre-recession levels. This is not necessarily good or bad. There are many factors that play into changing levels of turnover, such as industry shifts and demographic trends, so economists do not look for a particular turnover rate that will signify recovery. What we do try to understand are the regional characteristics that influence turnover rates such as industry composition, and the age distribution of the workforce.

The “County Turnover” tab in the visualization above allows you to see how the turnover rates of Utah’s counties have changed since the recession. Use the map at the top left to select the county or counties (ctrl + select for multiples) that you are interested in and the visualization will automatically update. Hover over points of interest in the charts to see additional detail.

Industry Composition and Turnover

As you might expect, different industries naturally have different turnover rates. Restaurants, for instance, tend to have higher employee churn than manufacturing plants. This is simply due to the nature of the jobs in these industries - some jobs tend to be interim work done by individuals in pursuit of other career goals, while others tend to be longer-term career choices.

In Utah (and nationally), the industries that tend to have the highest turnover rates are Administrative/Support/Waste Management, Accommodation/Food Services, and Arts/Entertainment/Recreation, so it stands to reason that  regional economies more dependent on these industries are likely to have higher turnover rates and visa versa. 

Select the “Industry/Age and Turnover” tab in the visualization above to explore which industries compose the largest share of your county’s employment and how that plays into your county’s turnover rate over time. 

Workforce Age Distribution and Turnover

Similarly, the age distribution of the workforce can play a major role in turnover rates. As you might expect, younger workers tend to change jobs more often. As workers move up in age they tend to settle into a career and change jobs less frequently until retirement age when average turnover rates tend to increase somewhat again.

On average in Utah, the share of the workforce between 25 and 64 years old has increased since the recession, while the share between 14 and 24 has fallen. This means that after the recession we would expect turnover rates to settle at a lower overall level, even after the economy has fully recovered.

Use the bottom half of the “Industry/Age and Turnover” tab to see how age distribution affects your county’s turnover rates.

4 comments:

  1. Could you state what your formula is for calculating turnover rates? These numbers are quite a bit higher than turnover statistics published by the US Census Bureau for Utah in the Quarterly Workforce Indicators. It would be good to understand how we can reconcile the two sets of numbers.

    Thanks.

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    Replies
    1. Thank you for your interest our blog and Utah's economy. This is an important point, and one that probably should have been made in the original post.

      The intent of the blog was to show the long term trends in turnover rates, so the raw Census QWI data were seasonally adjusted using Census X-13 and then smoothed using a simple 4-quarter moving average. This was done to smooth what were pretty volatile series (especially in the smaller counties), so that readers could see the longer term trends hidden beneath the noise.

      This means that for counties with large seasonal swings (e.g. Summit, Garfield, Daggett) the trend line, as a whole, may look higher than when you compare it to the raw QWI data. Summit County, for example, goes from about 10% to 30% turnover in the first quarter of each year (post-recession) so after seasonal adjustment and averaging, the trend line winds up in the 15% to 16% range. So if someone is looking at Q2, Q3, or Q4 for Summit County in the raw QWI, the rate in the post will be higher in comparison, but if they look at Q1, it will be well below.

      Again, the purpose of the blog was to reveal the long term trends, not the quarter-to-quarter dynamics, so if you are looking for a data-set to use for your own analysis or for any official purpose, you should use the Census data directly.

      I hope this sufficiently answers your question.

      Best,

      Matt Schroeder
      Regional Economist

      Delete
  2. Can you see the turnover rate for a specific company before accepting a job

    ReplyDelete
    Replies
    1. Unfortunately no. These data are available only at an aggregate industry level.

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