What Does Everything Besides the Unemployment Rate Tell Us About Labor Market Tightness?

Bognar, Levi; Faberman, R. Jason; Kepner, Elizabeth; LaGuardia, Emma

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What Does Everything Besides the Unemployment Rate Tell Us About Labor Market Tightness?

Abstract: Between March 2022 and June 2023, the unemployment rate, the most commonly used gauge of labor market tightness, remained in a narrow range between 3.4% and 3.7%. Yet, over this period, nominal wage growth increased to unusually high levels and then moderated, though it remains at a historically high rate. The disparity between a relatively constant unemployment rate and large movements in nominal wage growth has led to a divide in public discourse, with some seeing low unemployment and strong wage growth as a sufficient sign of the strength of the labor market and others concerned that the consistently low unemployment rate suggests labor market strength has plateaued and might be susceptible to a rapid deterioration.

Keywords: Employment; Unemployment; Human capital; Wages; labor costs; Vacancies;

JEL Classification: E24; E30; J30; J60;