Labor Market: Indicators to Monitor Its Health
As noted in [7], there is a very strong correlation between bank tightening , particularly at the small firm level, and employment . The percent of banks tightening on loans to small businesses leads nonfarm payrolls by about 6 months and suggests unemployment levels will be picking up in the coming months. In this article, we will discuss different ways of monitoring labor market's health . Recession Recession was one of the most frequent media topics in the past months, with some sources even choosing "looming" as part of the description. [12-17] Recession happens typically after a period of: Over-investment Tight labor conditions Labor market usually peaks 7 months in advance of a recession Tight central bank monetary policies Significant capacity constraints [8] The Federal Reserve monitors capacity constraints because they indicate where supply bottlenecks are developing and inflation is beginning to simmer In the last recession, the Nati...