Healthcare sector adds jobs through fall but still faces elevated quit rates: Fitch Ratings

Though national data suggest staffing shortages across hospitals and other provider settings lessened through November, workers are still leaving their positions for greener pastures at rates well exceeding those in the previous decade.

“The high quits rate indicates that healthcare and social assistance workers have a high willingness and ability to leave their current jobs and highlights the pressure on health systems to provide increased wages and improved working conditions to employees,” Fitch Ratings analysts wrote in a recent sector update citing preliminary Bureau of Labor Statistics (BLS) data from the past few months.

Hospital and ambulatory healthcare providers added 11,000 (0.21%) and 23,300 (0.28%) jobs to their payrolls from October to November, per the BLS. This continued a steady increase seen since the spring but landed slightly below the year’s average monthly gain.

Hospital sector unemployment dropped from 1.8% to 1.3%. This was above the year’s 1.1% low point, though “Fitch believes the current unemployment rate still indicates a challenging environment for employee recruitment,” analysts wrote.

Data from September to October showed a decline of 86,000 job openings within the healthcare and social assistance sector, Fitch analysts noted. This represented an openings rate shift from 9.1% to 8.7%—both still “very high” compared to the prior decade’s 4.2% average, they wrote.

Quit and hire rates within the healthcare and social assistance sector tell a similar story. The former’s 2.5% rate suggests “marginal” monthly improvement while continuing to tower over the previous decade’s 1.6% average, Fitch analysts wrote.

The sector is still in a hiring flurry compared to previous years, though also looked to be slowing during the fall. Specifically, September’s 3.6% hiring rate gave way to October’s 3.4% rate, both of which were above the prior decade’s 2.8% average.

“Fitch notes that other separations (which include retirements) in 2022 were on pace with 2021 through August, but are showing a significant decline in recent months as the 31,000 in September and October 2022 combined were less than half of the 75,000 in September and October 2021 combined,” analysts wrote.

Healthcare workers’ take-home pay has similarly been inching upward during the fall. For hospital workers, average hourly earnings rose 0.63% to $39.89 from September to October whereas ambulatory services workers’ average pay rose 0.52% to $36.79 per hour. Hospital workers have seen a 17.32% hourly pay increase since the start of the pandemic—“well above” the 14.29% of the broader public sector and the 12.34% of the ambulatory services subsector, analysts wrote.

The firm’s update also called out lingering worker shortages among nursing facilities and the impacts those could have on hospitals.

On the one hand, 18.1% of nursing facilities reported shortages of nurses as of late November, up from 28.3% during a January peak in COVID-19 cases. Sustaining those gains “should help improve length of stay/discharge challenges at hospitals,” analysts wrote.

However, the respiratory virus "tripledemic" hitting hospitals presents “a major near-term risk to labor costs” for hospitals across the country, the firm said in an accompanying release. Fewer open beds and staff callouts due to illnesses “could temporarily increase the need for contract labor and erode some of the agency staffing cost improvements that health systems have made over the past few months,” Fitch said.

Labor costs and capacity-driven length-of-stay increases are both having major impacts on hospital margins through the late fall, per monthly data released by Kaufman Hall a few weeks back. Industrywide labor costs increased 3% from September to October and was up 7% year to date, pushing a tenth straight month of red margins, the firm reported.