Labor Dynamics
What is the labor market signaling about inflation pressure and growth sustainability?
The Labor Dynamics lens assesses the state of the US labor market as a leading indicator for both inflation trajectory and growth sustainability. The labor market sits at the intersection of the Fed's dual mandate (maximum employment and price stability): a tight labor market fuels wage-price feedback loops, while a loosening labor market signals recession risk. This lens tracks not just headline numbers but the composition and dynamics underneath — where the turning points hide.
Signals Produced
Labor Market Tightness
LABOR_TIGHTNESS
Wage Pressure
WAGE_PRESSURE
Analysis Stages
Headline Assessment
What are the top-line labor metrics saying? NFP, unemployment, participation.
Composition Analysis
Where is job growth concentrated? What sectors are hiring/laying off? Full-time vs part-time?
Wage Dynamics
Are wages accelerating, stable, or moderating? Is growth outpacing or trailing productivity?
Turning Point Detection
Are leading indicators (claims, JOLTS, ISM employment) signaling a change before it shows in headlines?
Required Sources
Must Have
Payroll gains, unemployment rate, participation rate, hours worked
BLS.gov
Job openings, quits rate, hires rate, openings/unemployed ratio
BLS.gov
Labor market characterization, dual mandate balance language
federalreserve.gov
Enhances Analysis
Total compensation growth, wages vs benefits breakdown
BLS.gov (quarterly)
Median wage growth by job-switcher/stayer, industry
atlantafed.org
Initial and continuing claims, 4-week moving average
DOL via FRED
25-54 participation rate (cleaner than headline)
BLS.gov
Manufacturing and services hiring intentions
ISM
Nonfarm productivity growth, unit labor costs
BLS.gov (quarterly)
When This Lens Applies
Always applicable for US Monetary Policy theme. The labor market is one half of the Fed's dual mandate.
Heightened Priority Triggers
- Unemployment rate rises >0.4pp from cycle low (Sahm Rule territory)
- JOLTS openings/unemployed ratio drops below 1.0
- Initial claims 4-week average rises above 250K
- ECI or Atlanta Fed wage tracker diverges from trend by >1pp