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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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March 31, 2006


More On Labor Force Participation Rates

In today's Wall Street Journal (page A2 in the print edition), Greg Ip reports on a study by the Federal Reserve Board's Stephanie Aaronson, Bruce Fallick, Andrew Figura, Jonathan Pingle and William Wascher, wherein the authors join the growing consensus that low labor force participation rates may not be a sign of labor market weakness after all.  The basic conclusion, from the Aaronson et al paper:

A key question is whether the decline in the participation rate since 2000 primarily reflects cyclical forces—the tendency for individuals to withdraw from the labor force during periods of reduced job opportunities—or longer-lasting structural influences...

On balance, the results suggest that most of the decline in the participation rate during and immediately following the 2001 recession was a response to business cycle developments. However, the continued decline in participation in subsequent years and the absence of a significant rebound in 2005 appears to reflect other more structural factors. Indeed, the current level of the participation rate is close to our model-based estimate of its longer-run trend level, suggesting that the current state of the labor  market is roughly neutral for the participation rate.

This is exactly the point I was trying to make awhile back.  If you want characterize the performance of US labor markets in 2001 and 2002 in terms that connote anything better than lousy, you have a tough sale to make.  But the perception that the labor market substantially underperformed relative to its potential over the past three years looks increasingly like a mistaken impression.  It may be about time to start rewriting that little bit of recent economic history.   

March 31, 2006 in Labor Markets | Permalink

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I'm sorry but there is absolutely no way you are going to put lipstick on this pig and call it a robust labor market. It is robust for junior accountants, truck drivers and hammer throwers (construction workers). The truck driver and hammer thrower cohort is about to dry up (interest rates and fuel costs) so that means only accountants will be able to find work. Or will they? Fact is without hammer throwers or road warriors there is no work for the accountants. So if your economy is booming today - give it a couple of months. We aren't heading into a mild recession - we are heading for the mother of all depressions.

Posted by: john | March 31, 2006 at 05:49 PM


i ditto parts of john. i think we are headed for recession if the fed keeps raising rates in the very near future.

i know of too many anecdotal experiences that indicate labor market softness. as john may have indicated, the softness or strength of labor markets seems to be concentrated in certain areas. the labor market recovery does not appear to be broad-based.

Chicago will see a glut in high-rise condos. See coming Mandarin, Trump's new building, and many others. You might be able to buy something for 30-50% of list price.

Posted by: anon | March 31, 2006 at 07:51 PM


In Chicago recent history, the Ritz-Carlton was sold while the Mandarin was being built. Very interesting (at least to me). One company cuts capacity (Ritz owners) while another adds (Mandarin). This being said, the Mandarin is cool: even if real estate slows dramatically for high-rise condos in Chicago, the Mandarin might still be okay and not sell for a discount. Trump may be more marginal. In non-media business, Trump has a history for bankruptcy and overextending at the wrong times. Look for a possible Chicago belly-flop and some bargains in the future.

http://www.asiatraveltips.com/news05/76-Chicago.shtml

http://www.hotel-online.com/News/PR2005_2nd/Jun05_RitzChicago.html

Posted by: anon | March 31, 2006 at 07:56 PM

Ha , strong labor market, you have got to be kidding. How can you seriously post this?

Posted by: me | March 31, 2006 at 08:40 PM


maybe the U.S. economy is strong.

maybe all the foreign buyers of U.S. treasuries will get whacked when interest rates continue to rise and bond prices fall. maybe this will be a big wealth transfer to the U.S. Maybe foreigners are overpaying for U.S. treasuries.

maybe blogging suffers from adverse selection: maybe a bunch of overly isolated and pessimistic people post to blogs.

dunno

Posted by: anon | April 01, 2006 at 04:56 PM

Have to agree with David on this one. There is strong participation at all levels. the job market is so strong that we are importing illegal aliens to fill them!

Many jobs are left unfilled due to the fact that they cannot find skilled workers to fill them.

Foreign buyers of US debt don't care about the labor market here, they are looking for a place to invest teh dollars that they have made from trade.

Posted by: jeff | April 01, 2006 at 07:40 PM

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