Jul 10, 2023Liked by Pascal Michaillat

I really appreciate the analysis you share. Thank you.

I wonder, how do you think about the fact that there's cyclicality in U's ability to capture jobseeking? As you know, people become newly employed from either unemployment (a UE transition) or from not in the labor force (an NE transition). These days, only 1 in 4 newly employed people are coming from U and 3 in 4 are coming from N. However, this relationship isn't stable. The UE share of (UE+NE)

rises during recessions and falls during expansions, as can be seen here:


So vacancies per unemployed (V/U) would seem to overstate tightness when the labor market is tight. Including a correction, factor to U -- something like U*(NE/(UE+NE)) -- might give a different picture of how far we are from optimal tightness?

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