CHART OF THE DAY: Labor Force Flows

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.