Economic Commentaries

Entries for July 2015


Federal Reserve Chair Yellen delivered an economic policy message in Cleveland, Ohio on Friday July 9, 2015. In response to a question about the labor market she answered that if she had to choose only one indicator, she would select the jobless rate for guidance on labor market conditions. We think this would be a poor choice. Indeed, in our view the jobless rate is one of the least informative measures of labor market conditions in this recovery period.

The jobless rate is measured as the ratio of the number of unemployed who are looking for work to the level of the civilian labor force. In the current recovery numbers of unemployed have remained high relative to past recoveries. But the labor force has defied nearly everyone’s expectation with its lack of growth. This can be attributed to the unusual and persistent pattern of declining labor force participation.

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