U.S. labor market signals are conflicting to an “unprecedented” degree, but those suggesting labor market slack should be given more weight than those pointing to tightness, according a paper prepared by the San Francisco Federal Reserve Bank.
The paper, published Monday, looked at 26 labor market measures that typically move in tandem and found that during the current recovery they are giving wildly divergent signals about the health of the job market.
The job openings rate, for instance, suggests the job market is much tighter than the unemployment rate; the labor force participation rate points to much more slack than detected in the unemployment rate.
Because the pandemic has forced so many people out of the workforce, “negative signals such as the low labor force participation rate provide a better read than do the positive signals,” the researchers argued.
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