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What Does Labor Market Tightness Tell Us About the End of an Expansion?

Abstract: We use a model based on the historical relationships between unemployment, inflation, and recessions, along with the Summary of Economic Projections (SEP) from the Federal Open Market Committee (FOMC),1 to examine the medium-term implications of current and projected unemployment rates for the U.S. economy. Our model predicts a low probability of a recession in the next two to three years based on SEP forecasts for additional labor market tightening over this horizon.

Keywords: wages; inflation; recessions; unemployment; Labor market;

https://doi.org/10.21033/cfl-2018-403

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Publication Date: 2018

Order Number: 403