The Labor Market Recovery Continues

By Thomas Cooley and Peter Rupert

The preliminary establishment data released by the BLS for October shows strength  across the board in the labor market. Employment rose by 271,000 in October, and 268,000 of those were in the private sector.  Average weekly hours increased, the employment population ratio increased and the labor force participation rate stayed flat, although these two measures remain at historically low levels.

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Earnings and Productivity

Another encouraging sign is that average hourly earnings and productivity both increased slightly, suggesting that competitive forces are beginning to assert themselves.

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The Unemployed and The Underemployed

In addition to the improving jobs and compensation numbers there is evidence that  long duration unemployment is declining and the numbers of those that are employed part-time for economic reasons are declining.

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The Labor Market and the Fed

The business press and economic pundits all view this strong jobs report as erasing one of the remaining justifications for the Fed’s reluctance to normalize monetary policy and begin raising rates. That may very well be true but it doesn’t mean that the labor market has emerged from the long shadow cast by the great recession. The recession inflicted lasting damage to the labor market, damage that is revealed in the continuing low participation rates and more importantly in the deterioration of the market’s ability to match workers with jobs as is suggested by the outward shift in the Beveridge Curve for the U.S.  These problems are long term and structural and not likely to be solved by monetary policy.

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