Long Term Perspective
The civilian unemployment rate can indicate tightness in the labor market. But economists and policy makers have long held the belief that the unemployment rate can give a misleading picture of the degree of labor market tightness because the supply of labor isn't fixed. Indeed, people are often not counted as part of the labor force when the economy is in recession because they simply give up job hunting. As a result, the unemployment rate is often underestimating the true level of unemployment. In good economic periods, people are more likely to enter the labor force because they have more confidence they will find a job. Thus, the Fed chairman likes the idea of going to the source - that is, the source of available labor. The labor pool consists of the unemployed plus those not in the labor force who report they want a job now.

Short Term Perspective
The pool of available labor continued to climb. Notice that the upward trend in the pool of available labor began about the same time that the unemployment rate started to edge higher - both bottomed in September-October 2000. This indicator takes a backseat to other indicators these days given that labor demand issues are more important than labor supply when the unemployment rate is rising.

Alternative Inflation Measures   •   Gold Prices   •   Employment Cost Index   •   Civilian Unemployment Rate

Pool of Available Labor   •   Nonfarm Productivity   •   Treasury Yields   •   Stock Prices   •   Fed Monetary Policy Summary