Federal Reserve Board Governor Ben S. Bernanke offers his views on current issues in macroeconomics. He points to research which suggests that the household survey of employment, which shows a stronger labor market than the payroll survey, may be misleading. That is because the household survey has to be "multiplied up" by a factor that reflects the assumed ratio of population to the survey. If population is over-estimated--and this may be the case--then employment will be over-estimated.
Overall, Bernanke takes the view that the labor market is weak.
Indicators of labor market underperformance include (1) the unemployment rate, which remains 1.9 percentage points above its level at the March 2001 peak of the business cycle; (2) a significant decline in labor force participation, particularly among younger workers; (3) the rising share of the unemployed who have been out of work six months or more; (4) the relatively slow decline in initial claims for unemployment insurance, as well as in continuing claims (though both of these have improved a bit lately); (5) the fact that the Conference Board's index of help-wanted advertising remains below the level of the recession trough; and (6) the relatively pessimistic views about prospects for the labor market revealed in surveys of both employers and workers.
Of the possible explanations for the weak labor market, Bernanke believes that strong productivity growth is probably the most significant. He suggests that this is a positive development, because it leaves room for continued strong economic growth with low inflation.