I’m not sure about tight, but people with jobs definitely think the labor market is behaving normally.
There’s a common argument that the labor market is a lot looser than the unemployment rate would suggest: loose in the sense that there’s unemployed people all around that are a good fit for a job.
The current unemployment rate of around 6.5% isn’t great, but it isn’t that bad either … especially considering that we’re riding down a demographic wave* in which our population is, on average, less likely to be working.
If the labor market was loose — so that people were really worried about losing their jobs because the slack would be taken up by someone else — then they’d be less likely to quit. Here’s Soltas’ chart:
The market would be loose if the red dot was below the blue cloud of points. It isn’t. This suggests that the labor market is behaving normally … and is not loose, as many would have you believe.
Now, we don’t know the “right” level of unemployment: it’s been lower than this quite a bit over the 2001-13 sample shown here, but that was when we were higher on the labor participation wave than we are now. But, if we move to the left, we should also move up. Perhaps I’ll come back and reexamine this data with next year’s class.
* I found out something interesting reading a novel this past winter. The word I want here isn’t wave at all, it’s scend. The wave is the water. The scend is what something on the water does when the wave passes. That’s where ascend and descend come from: the ship’s deck ascends and then descends as the wave passes by (note that we don’t “awave” and “dewave”). Anyway, I still used wave here because clearly that’s the word we use in 2014.
Cross-posted from SUU Macroblog, which is required reading for my macroeconomics classes.