An Improving but Slack Labor Market

I interpret the current Bureau of Labor (BLS) statistics as meaning that people are returning to the workforce as work becomes available, and there is more work, but right now there is still not enough work; demand for labor is still slack.

I therefore see every reason to keep interest rates low and undertake whatever reasonable programs will be effective in raising aggregate demand. The labor market appears to be "normalizing," and by 2018 or so will, unless something throws it off track, be back to something like "full" employment, though I expect wages will be lower than pre-depression levels. As we approach full employment I expect major efforts from the right to reduce employment, so as to reduce labor costs. We already seem to be seeing some, in the form of pressure to raise interest rates, though so many people are still out of work, and more are struggling.

(This is a very simple reading of the statistics, and many economists do not agree with it. Paul Krugman, who started me looking at these data, says that no-one actually knows if the labor market is slack. As a bird on the ground, though, it sure looks slack to me, and a simple reading of the statistics seems to support my position.)

Supporting data

• U-6, the unemployment measure that includes people who are sort-of working but can't find enough work, rose dramatically in 2008 and has been falling since the beginning of 2010. By 2018 or so, a straight-line projection will return it to its 2007 level.
• The employment/population ratio remains poor.
• The August 2014 BLS Job Openings and Labor Turnover Survey (JOLTS) found 2 job seekers for every job, which is a normal number; people are being hired at pre-depression rates.