MNI POLICY: US Labor Market Less Tight Than Data Suggest-Paper

By Jean Yung

     WASHINGTON (MNI) - The U.S. labor market was "considerably less tight" at

the end of 2018 than the unemployment rate might have suggested, if large

numbers of people not seeking actively work or working part time but wanting to

work more are taken into account, according to research to be presented to the

Federal Open Market Committee on Tuesday.

     While a standard measure of labor market tightness -- the vacancy to

unemployment ratio -- is about 30% higher than its value in 2001, a broader

measure constructed by University of Maryland economists Katharine Abraham and

John Haltiwanger is roughly at the same level as 18 years ago. 

     That may help explain the discrepancy between available data about the

tightness of the labor market and the apparent lack of upward pressure on wages

and prices, they said.

     Existing employment measures are doing a poor job of capturing the true

state of the labor market, because they do not account of important variations

in search behavior on the part of both firms and workers, the authors argue.

Today's job searchers include not only the unemployed but also the employed and

those who are out of the labor force.

     The Non-Employment Index out of the Richmond Fed is one existing measure

that attempts to account for all of the non-employed, rather than just the

unemployed, but, one significant omission is that it does not include on-the-job

searchers or job-to-job transitions, the authors said.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]