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How Tight Is the U.S. Labor Market?
The U.S. unemployment rate fell to a very low level at the end of 2016, raising the question of whether the labor market has become too tight. After applying a new method to adjust for demographic changes in the labor force, the current unemployment rate is still 0.3 to 0.4 percentage point higher than at past labor market peaks. This indicates that the labor market may not be quite as tight as the headline unemployment rate suggests.
A Sufficient Statistics Approach for Macro Policy Evaluation
The evaluation of macroeconomic policy decisions has traditionally relied on the formulation of a specific economic model. In this work, we show that two statistics are sufficient to detect, often even correct, non-optimal policies, i.e., policies that do not minimize the loss function. The two sufficient statistics are (i) the effects of policy shocks on the policy objectives, and (ii) forecasts for the policy objectives conditional on the policy decision. Both statistics can be estimated without relying on a specific model. We illustrate the method by studying US monetary policy decisions.