The Labor Market Is Tightening Much More Rapidly Than You Think
11th January 2014
What we have right now is four labor markets.
We have a teen/early 20-something labor market where the participation collapsed as people focused more on education and/or can’t find work. In the long run, this group will be fine.
We have an age 55+ labor market which fared much better over the past 10 years than the rest of the workforce, but will begin to stagnate and shrink as retirements accelerate.
We have a peak-age labor market which is tightening very quickly, and should be near full employment before the 2016 election.
And we have a segment of the labor market, probably somewhere between 1-3 million people, of workers who are some combination of older, less educated, immobile due to being underwater on their homes, or not properly trained for the modern economy, who need major help from the government. They can’t find work at wage levels they’ll accept. Fiscal policy for this group would be 100% effective, but monetary policy at this point is of dubious help.