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 Below is a chart and brief excerpt from today's Early Look written by Macro Analyst Christian Drake.

CHART OF THE DAY: Labor Force Flows - 12 5 2019 9 19 20 AM

The Flow from Not in Labor Force → Employed carries a number of implications:

  1. In the near-term it represents a constraining factor within a larger barbell effect in earnings growth. That is, while skilled labor is commanding a premium wage (earnings growth for “job switchers” is running at a notable premium to the national average), new entrants into the labor force and those who have been out of work for a long-time are not necessarily in a position to command premium compensation.  To the extent, this flow represents a meaningful share of new hires, it serves to otherwise dampen average hourly earnings growth. 
  2. The onboarding of out-of-labor force workers has supported aggregate hours growth and has helped buttress output growth in the face of soft productivity growth, weak birth trends and slowing immigration dynamics.
  3. On a secular basis, increasing labor scarcity equals lower real growth and increased labor costs, a negative factor setup absent resurgent productivity growth.    

CHART OF THE DAY: Labor Force Flows - CoD Labor Flow