Should-read: Josh Bivens: The fuzzy line between “unemployed” and “not in the labor force” and what it means for job creation strategies and the Federal Reserve

Should-Read: When 70% of newly employed workers are people who were not previously looking for a job, defining the labor force as the sum of employed and actively searching not employed makes very little sense: Josh Bivens: The fuzzy line between “unemployed” and “not in the labor force” and what it means for job creation strategies and the Federal Reserve: “Jobless people are classified into… either unemployed or not in the labor force…

…The unemployment rate is defined as the number of unemployed workers divided by the sum of employed and unemployed workers (or, the labor force). This rate tries exactly to capture what share of the adult population wants work, but hasn’t found it. This is why it is the most commonly referenced measure of “slack” in the labor market…. [But] the share of newly employed workers who were previously not searching for work is always high—well over half. Second, recent years have seen this share hit historic highs…. Because more and more jobs are being filled by people claiming to not have been looking for work it seems like the unemployment rate is becoming less useful as a clear-cut measure of labor market slack—this means we shouldn’t rely on it alone to decide whether or not the economy is at full employment…. It seems like Americans have plenty of appetite for new jobs (and particularly for good jobs). This means we should still be thinking hard about strategies for job creation—like I did in a recent paper. Finally, we don’t need policymakers who are committed to slowing the economy because they think unemployment has fallen low enough. Instead, we need policymakers willing to aggressively test just how fast the economy can grow before sparking inflation. The most important policymakers in this regard are the Federal Reserve, and this makes the next pick to head the Federal Reserve Bank of New York crucially important…