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Nov 28 2012

Labor Market Paradox

Over a recent two-month period, the jobless rate fell half a percentage point, bolstering the belief that the U.S. economy has dodged recession. At the same time, job growth remains weaker than in any other expansion on record. How is it possible for anemic job growth to fuel such a drop in the unemployment rate?

ECRI’s research investigates the cyclical and structural drivers of labor force growth to root out what has been truly driving the drop in joblessness. Moreover, with the Fed explicitly targeting the jobless rate to time its exit from monetary easing, our analysis has clear implications with regard to the Fed’s policy choices.

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