Taking the Temperature of the U.S. Labor Market

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Since the end of the Great Recession, the economy has added 7.7 million jobs, and the unemployment rate has fallen from 10 percent to 6.7 percent. But beneath these top-line numbers, the labor market is still quite fragile. In March, the Federal Reserve tacitly acknowledged the widening gap between the reality of the labor market and its most well-known measures by switching from a quantitative unemployment threshold to more comprehensive “measures of the labor market” in its forward guidance. The question, then, is this: What are some of these broader labor-market indicators the Federal Reserve will be looking at? Here’s a quick tour of the most important jobs data you never see in the headlines.

When the economy is doing well, more people typically enter the labor market because there are more jobs available. So we should expect the labor-force participation rate to be increasing in the aftermath of the recession. It hasn’t been. Instead, it’s declined steadily since the end of the recession and is as low today as it was in the late 1970s, when women were entering the workforce for the first time.

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