The chart below tells a familiar, but not too happy, story. Only one of the variables in the collection of employer behavior, employee and employer confidence, and labor resource utilization categories has recovered even half the gap from its prerecession benchmark. The labor resource utilization variables look particularly bad, with one variable—marginally attached workers—actually getting worse over the recovery as a whole. On the brighter side, our leading-indicator variables are looking relatively strong, perhaps portending improvement ahead.
The interpretation of these spider charts comes with several caveats. First, a variable such as the level of payroll employment will eventually exceed its pre-recession level, and grow consistently over time as the population grows. A variable like “hiring plans”—which is the net percentage of firms in the National Federation of Independent Business survey expecting to hire employees in the next three months—cannot grow without bound. Thus, the charts by construction are about visualizing the transition to some fixed benchmark, not a device for monitoring labor markets over the long run.
Second, it is not obvious that 2007:IVQ levels are necessarily the best benchmarks for all (or even any) of the variables we are monitoring. For example, the demographics associated with the aging of the baby-boom generations have arguably slowed the long-term trend in employment growth, meaning that a return to pre-recession payroll jobs will be slow even in circumstance that we would want to characterize as a “substantially” improving labor market.
Finally, signs of labor market improvement sufficient to alter the pace of FOMC asset purchases may be more about momentum or steady progress than about the return to a specific target or threshold. In fact, this chart depicts signs of such progress over the past three years…
Choosen excerpts by Job Market Monitor from
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