Journal Article

Will tightness in Tenth District labor markets result in economic slowdown?

Abstract: Labor markets in the Tenth District are tighter now than at any time in recent memory. The steady fall of unemployment rates in recent years has led many analysts to wonder if future economic growth in the region could be restricted by labor shortages. The district's labor market is actually even tighter than suggested by its unemployment rate of less than 4 percent in 1998 due to the presence of two other significant, but often overlooked, factors: high labor force participation rates and slowing domestic migration flows.> The labor force participation rate, meaning roughly the percentage of the working-age population that is actively taking part in the labor force, has been increasing rapidly in the district this decade and is now well above the national rate. This means the district is likely to have a more difficult time drawing new workers from its own population in the future. Likewise, the district has suffered in recent years from smaller net migration flows from the rest of the country after several years of strong gains following the 1990-91 recession. Thus, at a time when district labor markets need to be drawing more workers from other parts of the country, the flow of new workers is actually drying up.> Gazel and Wilkerson explore whether the growth of jobs in the district is likely to be hampered by slower growth in the labor supply in the presence of tight labor markets. They find that the district's extremely low unemployment rate, combined with a record level of labor force participation and diminishing migration inflows, does indeed reflect an economy that is likely to suffer from slow labor supply growth in the near future.

Keywords: Labor market; Employment (Economic theory); Federal Reserve District, 10th;

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 1998

Volume: 83

Issue: Q IV

Pages: 67-80