MNI BRIEF:Labor Slack To Disappear By Summer's End -Dallas Fed

The June U.S. employment-to-population ratio suggests considerable slack in the U.S. labor market tied to the Covid-19 pandemic has mostly been absorbed, according to new research from the Dallas Fed, and remaining slack is likely to be absorbed by the end of the summer.

The Fed bank's estimated "natural" EPOP ratio, using CPS data on individuals 16 years or older, stood at 58.3% as of June, just 0.3pp higher than the actual EPOP ratio of 58.0% reported by the Bureau of Labor Statistics last week. That gap represents a shortfall of 675,000 jobs, Dallas Fed researchers wrote.

Overall employment in June remained 7.1 million jobs below the February 2020 level, but the bulk of that represents jobs that exceed the natural employment-to-population ratio due to the tight pre-pandemic labor market, they said. Other factors like retirements have also played a large role. The EPOP ratio has become a top indicator for the Fed after its framework review last year.