July 7, 2018

Contrary to popular opinion, the low rate of unemployment does not signal a strong labor market

Comments like this one: “This is a good job-creation number, but on the other hand we see still continued soft wage growth”, should signal that things in the labor market are not as good, or strong, as generally thought. A strong labor market is characterized by a high employment population ratio (EPOP) and a high labor force participation rate (LFPR). The ratio of these two quantities define the unemployment rate. Therefore, a low unemployment rate is consistent with both high EPOP and high LFPR as well as with a low EOPO and low LFPR, as long as their ratio is… Read More