Model Perspectives on Supply and Demand Factors behind a Soft Labor Market

Danilo Cascaldi-Garcia and Camilo Morales-Jimenez

No 2026-01-30-2, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: U.S. employment growth slowed down notably in the second part of 2025, and a key question is how much of the weakness stems from labor demand and how much from labor supply. In this note, we examine this question from the point of view of two different models: a statistical model that uses an intuitive interpretation of the joint behavior of employment and wage growth to infer the effects of labor supply and demand (VAR), and a structural dynamic stochastic general equilibrium (DSGE) model that uses a much wider array of data.

Date: 2026-01-30
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:102398

DOI: 10.17016/2380-7172.3959

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