Making Sense of Labor Market Indicators Amid Data Imperfections

Scott A. Brave, Erin E. Crust, Stefano Eusepi, Bart Hobijn and Aysegul Sahin

No 35196, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Interpreting real-time labor market conditions is challenging because commonly used indicators are noisy, revised over time, and often send conflicting signals. In practice, policymakers and market participants describe labor market developments using a shared narrative language centered on labor demand, labor supply, and matching frictions. In this paper, we show that empirical measures of these narrative concepts can be recovered from latent factors that summarize the joint movements of a broad set of high-frequency U.S. labor-market indicators. We use ninety-four labor-market indicators, over the period from 1960 to 2026, and construct measures for labor demand, long-run labor supply, short-run labor supply, and matching efficiency by selecting the factors that satisfy a limited set of restrictions on how underlying forces map into observed data. We find that labor demand and short-run labor supply account for most of the common variation in labor-market indicators. Our results also show that assigning narrow interpretations to individual indicators can lead to misleading conclusions about underlying labor market conditions. Applying the framework to the post-pandemic period reveals that although labor demand recovered briskly after the acute phase of the pandemic, it cannot account for the large rise in vacancies and quits. Instead, movements in short-run labor supply and matching efficiency play a central role. We also show that the “soft-landing” episode from 2023 through 2025 was characterized by a joint decline in labor demand and short-run labor supply, which slowed payroll growth while generating only a moderate increase in the unemployment rate.

JEL-codes: C32 C38 E24 E32 E58 (search for similar items in EconPapers)
Date: 2026-05
Note: EFG ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35196.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35196

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35196
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().