Summary of The Importance of Strong Labor Demand

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By most metrics, the US economy is expanding, and Americans are reaping the benefits of job growth. So why are so many people working more hours but still not getting ahead? One reason may be that labor demand is less robust than it should be. Economist Jared Bernstein offers some provocative ideas on tackling the problem in this astute report, but even those may not be enough to reverse the trend. getAbstract recommends this technical analysis to economists and policy experts for its nuanced view of why so many Americans continue to struggle.

In this summary, you will learn

  • Why traditional measures of employment may fail to reveal the true status of the labor market;
  • How weak demand for labor is affecting American workers, especially those in lower wage jobs; and
  • What the Federal Reserve and other government policy makers might do to help increase labor demand. 

About the Author

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities at the Hamilton Project of the Brookings Institution. 



All the good news about low unemployment filtering out of Washington, DC, may seem to bode well for future workers. But by one measure, traditional US labor statistics often paint a far too rosy picture and have done so for several decades. That yardstick, called labor market “slack,” measures the gap between the jobless rate and the “natural rate of unemployment,” or the lowest unemployment rate that economists think should prevail in a stable inflationary environment. Slack occurred in about 70% of all quarters between 1980 and 2017, compared to roughly one-third of all quarters between 1949 and 1980. 

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