Working Paper

Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength

Abstract: As a measure of labor market strength, the raw employment-to-population ratio (EPOP) confounds employment outcomes with labor supply behavior. Movement in the EPOP depends on the relative movements of the employment rate (one minus the unemployment rate) and the labor force participation rate. This paper proposes an adjustment to the calculation of the EPOP using individual microdata to account for both individual characteristics and the probability of labor force participation, which can used to assess the strength of the labor market.

Keywords: EPOP; employment-to-population ratio; labor force participation; unemployment rates; employment rate; structural versus cyclical;

JEL Classification: J11; J21; J64;

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2014-08-01

Number: 2014-8

Pages: 26 pages