Search Results
Journal Article
The Recent Slowdown in Labor Supply and Demand
The pace of job growth cooled through mid-2025, while the unemployment rate rose relatively little. This seeming puzzle is explained by an even stepdown of labor supply and demand, meaning slowing labor force growth coincided with a slowdown in job growth. The recent decline in job growth is broad based across industries, suggesting a widespread softening of labor demand. For the labor force, recent declines are driven by changes in immigration flows and declining labor force participation. Together, these factors may signal some underlying fragility in the labor market.
Journal Article
Unemployment: Lower for Longer?
Unemployment is running near its 50-year low, but inflation has not picked up as expected. This suggests that the unemployment rate consistent with stable inflation has fallen. Combining a conventional Phillips curve tradeoff between unemployment and inflation with a noninflationary unemployment rate that can change over time shows that estimates of this unemployment threshold have declined toward 4% in recent years. One possible reason for this decline is improvements in how job matches are made, reflected in unusually favorable job-finding rates for disadvantaged groups.
Working Paper
Evaluating Macroeconomic Outcomes Under Asymmetries: Expectations Matter
Asymmetries play an important role in many macroeconomic models. We show that assumptions on household and firm expectations play a key role in determining the effects of these asymmetries on macroeconomic outcomes. If households and firms have perfect foresight and hence do not account for the possibility of future shocks, then the implied longer-run averages and distributions for unemployment and inflation can differ significantly from their rational expectations counterparts. We first derive this result analytically under either an asymmetric monetary policy rule or a nonlinear Phillips ...
Journal Article
Estimating Natural Rates of Unemployment
Before the pandemic, the U.S. unemployment rate reached a historic low that was close to estimates of its underlying longer-run value and the short-run level associated with an absence of inflationary pressures. After two turbulent years, unemployment has returned to its pre-pandemic low, and the estimated underlying longer-run unemployment rate appears largely unchanged. However, economic disruptions appear to have pushed up the short-run noninflationary rate substantially, as high as 6%. Examining these different measures of the natural rate of unemployment can provide useful insights for ...
Working Paper
UI Generosity and Job Acceptance: Effects of the 2020 CARES Act
We assess labor market effects of the CARES Act $600 UI supplement. We start with direct empirical analyses of labor force transitions using monthly CPS data and imputed UI benefits. The results show moderate disincentive effects of the supplement on job finding. We rationalize this result in a dynamic model of job acceptance decisions that yields a reservation level of UI benefits at which a recipient is indifferent between unemployment and employment at their prior wage. Calculations based on the model confirm that only a small fraction of recipients of the enhanced UI benefits were likely ...
Report
Redefining the labor market. SF Fed economists Rob Valletta, Nicolas Petrosky-Nadeau, and Mary C. Daly share their thoughts on the U.S. labor market with fellow economist President John Williams
Changes in demographics, and in employer and worker needs, have redefined the U.S. labor market. We discuss the "new normal" in our 2015 annual report, What We've Learned?and why it matters. Observations include how the gig economy?or sharing economy?is affecting the part-time workforce. We also look at influences on labor force participation rates and clarify the math behind sluggish wage growth. A consideration for both is the retirement of higher-earning baby boomers and the increase in steady employment for lower-wage workers.
Working Paper
Replicating and Projecting the Path of COVID-19 with a Model-Implied Reproduction Number
We fit a simple epidemiology model to daily data on the number of currently-infected cases of COVID-19 in China, Italy, the United States, and Brazil. These four countries can be viewed as representing different stages, from late to early, of a COVID-19 epidemic cycle. We solve for a model-implied effective reproduction number Rt each day so that the model closely replicates the daily number of currently infected cases in each country. Using the model-implied time series of Rt, we construct a smoothed version of the in-sample trajectory which is used to project the future evolution of Rt and ...
Journal Article
Job-to-Job Transitions in an Evolving Labor Market
Job mobility in the United States has been slowing for almost two decades. The most prominent measure of mobility is direct transitions from one job to another. This measure has declined substantially among young workers ages 16 to 24 since the late 1990s, which helps explain the majority of the overall decline in job-to-job transition rates. However, for workers ages 25 and older, the labor market is essentially as dynamic today as it was 20 years ago.
Working Paper
Evaluating Macroeconomic Outcomes Under Asymmetries: Expectations Matter
Asymmetries play an important role in many macroeconomic models. We show that assumptions on household and firm expectations play a key role in determining the effects of these asymmetries on macroeconomic outcomes. If households and firms have perfect foresight and hence do not account for the possibility of future shocks, then the implied longer-run averages and distributions for unemployment and inflation can differ significantly from their rational expectations counterparts. We first derive this result analytically under either an asymmetric monetary policy rule or a nonlinear Phillips ...
Working Paper
Financial Frictions, the Housing Market, and Unemployment
We develop a two-sector search-matching model of the labor market with imperfect mobility of workers, augmented to incorporate a housing market and a frictional goods market. Homeowners use home equity as collateral to finance idiosyncratic consumption opportunities. A financial innovation that raises the acceptability of homes as collateral raises house prices and reduces unemployment. It also triggers a reallocation of workers, with the direction of the change depending on firms? market power in the goods market. A calibrated version of the model under adaptive learning can account for ...