MNI BRIEF: Fed Kaplan:Labor Market May be Tighter than Assumed

Dallas Fed President Robert Kaplan said Thursday he sees "real headwinds" in making improvements in labor force participation, and the current labor market is likely tighter than some may assume.

"There's probably a little bit more tightness in the labor force, and a little less slack," he said in at an annual Hyman P. Minsky Conference. Of the roughly 3.25pp drop in EPOP, or roughly 8.5 million people, maybe 2 million workers are "not going to come back because they've retired" and it will also be difficult for the roughly 1.5 million working mothers to re-enter the labor market, Kaplan said. "We would hope a meaningful percentage of them will come back but we acknowledge some number of them will not."

The employment-to-population ratio, or EPOP, is a key indicator for Fed officials watching the Covid rebound, MNI has reported.

Kaplan added his regional bank has doubled outreach to contacts in the Dallas region to determine whether the current price surge is transitory or persistent, showing a slight shift in his tone and acknowledging base effects.

"Based on all that outreach, I think the most the most intelligent comment I can make about this debate is I don't know yet," he said, adding that a number of his contacts say supply chain issues will take longer to resolve than previously thought.