Employee Tenure Dropped in 2016

Quicker turnover could signal strengthening job market

By Roy Maurer Oct 4, 2016
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U.S. workers are leaving their jobs faster, resulting in a higher turnover rate typically seen as a sign of a strengthening labor market.

The Bureau of Labor Statistics (BLS) announced that median employee tenure—the length of time a worker has been with his or her current employer—was 4.2 years in January 2016, down from 4.6 years in January 2014. It's the first dip recorded by the biennial survey since 2000.

"The recent drop reflects two signs of labor market strength," said Jed Kolko, chief economist at job search engine Indeed, based in Austin, Texas. "More people are getting hired, which lowers median tenure since they're new on the job, and more people are voluntarily quitting jobs, which is a sign of their confidence in the economy and their odds of finding a new job." 

Josh Wright, chief economist for talent acquisition software company iCIMS, pointed to the quits rate and generational change as being likely factors for the decline.

The quits rate—an indicator of job seeker confidence—rose from 1.7 percent in January 2014 to 2.1 percent in July 2016. Quits are "back in a fairly healthy range," Wright said. "In fact, [the rate] is within striking distance of its peak from the 2002-07 period."

He added that job-hopping Millennials are now entering the labor market in earnest and more Baby Boomers are retiring.

BLS researchers cautioned against reading too much into the drop in tenure, saying a strong economy might boost or depress the figure. "During periods of economic growth, median tenure … could fall if more job opportunities are available for new entrants to the workforce and experienced workers have more opportunities to change employers and take better jobs. Tenure also could rise under improving economic conditions, however, as fewer layoffs occur and good job matches develop between workers and employers," the agency said.

Tenure fell for both men and women and across most industries:

  • Median tenure for men declined from 4.7 years to 4.3 years.
  • Median tenure for women dropped from 4.5 years to 4.0 years.
  • Men and women with at least a college degree had higher median tenures of 5.2 years and 5.1 years, respectively.
  • Twenty-nine percent of men and 28 percent of women had been with their employer for 10 years or more in January 2016.
  • Twenty-two percent of Hispanic employees had been with their employer for 10 years or more in January 2016, compared with 30 percent of white employees and 25 percent of both black and Asian employees. Hispanic workers' shorter tenure can be explained, in part, by their relative youth as a demographic, according to the BLS.
  • The share of workers with one year or less of tenure with their current employer was 23 percent, little changed from 2014 (21 percent).
  • The median tenure of workers ages 55 to 64 (10.1 years) was more than three times that of workers ages 25 to 34 (2.8 years).
  • Public-sector workers had more than double the median tenure of private-sector employees, 7.7 years and 3.7 years, respectively.
  • Workers in manufacturing had the highest tenure among major industries, at 5.3 years in January 2016. In contrast, workers in leisure and hospitality had the lowest median tenure, at 2.2 years.
  • Workers in management and professional occupations had the highest median tenure, at 5.1 years in January 2016. Within this group, employees with jobs in management (6.3 years), architecture and engineering (5.5 years), and legal occupations (5.5 years) had the longest tenure.
  • Workers in service occupations had the lowest median tenure, at 2.9 years. Among employees working in service occupations, food service workers had the lowest median tenure (1.9 years).

Dispelling the Turnover Myth

It's generally thought that there is more employee churn in today's workforce than in previous decades. But that's not necessarily true, according to the data.

"Over the past 30 years, job tenure has been relatively stable for most age groups but has dropped sharply for older men, despite a modest rise in the past decade," Kolko said. "The 'job for life' is rarer than it used to be, and its disappearance is one of the primary ways that the labor market today is different than it was a generation ago."

But data shows that U.S. workers had an average job tenure of 3.5 years in 1983. It dipped even lower to 3.4 years in 1987, before slowly rising to 3.8 years by 1996, declining to 3.7 years by 2002 and then surpassing the 4-year mark in 2008, when the economy was retrenching. Since then, an aging workforce has helped push up tenure, with older workers tending to hold on to their jobs longer than younger workers.

"The workforce was aging as life expectancies extended and Baby Boomers stayed in the workforce longer to make up for lost savings and the disappearance of defined benefit pension plans," Wright said. "Note that over most of this period, many Millennials were still in school and therefore not in the labor force to counteract these Baby Boomer effects. On top of that, the sluggish recovery coming out of the Great Recession probably depressed worker confidence, discouraging workers from quitting, as evidenced by the drastic drop in the quit rate."

The latest drop in tenure comes during the strongest two years of job creation since 1998 and 1999, according to the BLS. U.S. employers reported creating nearly 5.8 million new jobs in 2014 and 2015. Initial jobless claims have declined since early 2014 and have been hovering at historically low levels.

"Since layoffs have declined over the last two years and remain near all-time lows, the decline in median employee tenure should be primarily due to retirements and quits," Wright said.

He added that the dip may be a positive indicator of wage growth. "One of the best ways to achieve wage gains is to find a new job, so higher turnover should support wage growth. A labor market with greater churn should also be one where mismatches between workers and employers get corrected more quickly and we see more of the right people in the right jobs." 

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