Labor Markets, Inflation, and the Economy

Ask the SF Fed: Labor Markets, Inflation, and the Economy.


Watch our discussion from October 12 on labor markets, inflation, and the economy. Our featured speaker, Sylvain Leduc, answered pre-submitted questions from the public in a discussion with our host moderator, Laura Monfredini, Executive Vice President. Key topics included the challenges of high inflation in the services sector, imbalances in the labor market, and the Fed’s efforts to restore price stability.

This discussion was a livestreamed event open to everyone and is available as a recording below.

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About the Speaker

Sylvain Leduc is Executive Vice President and Director of Research at the San Francisco Federal Reserve. As Director of Research, Sylvain oversees the development of key economic research and analysis that informs the decision-making process on monetary policy. Read Sylvain’s full bio.

Quick Clips

Wage Growth and Price Stability Need to Align

Wage growth and price stability need to align. October 12, 2023 (video, 00:52 minutes).

Wage adjustments typically compensate for a combination of productivity and inflation. Average labor productivity growth is about 1% and price stability is 2%. Adding these together, wage growth should be about 3% year-over-year to align with price stability.

Labor Force Participation Rates Differ by Age Group

Labor force participation rates differ by age group. October 12, 2023 (video, 00:59 minutes).

During the pandemic, the labor force participation (LFP) rate declined for all age groups, particularly for older workers. Since then, LFP for older workers has remained below its pre-pandemic level, while LFP for prime-age
workers has seen a big recovery.

Initial Jobless Claims Remain Largely Flat

Initial jobless claims remain largely flat. October 12, 2023 (video, 01:15 minutes).

Initial jobless claims are one of the many important economic indicators we track. During the pandemic, unemployment insurance claims sharply increased before settling back down as the economy improved. Today, these numbers remain largely flat, indicating continued resilience in the economy.

Is the Yield Curve Inversion Sending the Right Signal?

Is the yield curve inversion sending the right signal? October 12, 2023 (video, 00:58 minutes).

U.S. Treasury securities with longer maturities typically have higher yields than those with shorter maturities. However, an inverted yield curve reflects the opposite and historically occurs directly before a recession. Is the current yield curve inversion indicating a pending recession, or does it simply reflect investor expectations for inflation to come down in the future?