Read It Here First: Labor Market Slack

A Bank of America Merrill Lynch research note on the abysmal nonfarm payrolls number for June contained this graph:

A February 2010 Big Picture post on slack in the labor market contained this graph:

My comment at the time, which holds true today:

I’d postulate that only when this gap starts to close meaningfully will we have to consider the possibility that the Fed will tighten and/or that inflation might be somewhere out there on the horizon.  Until then, it’s very hard to envision they’ll consider moving off their ZIRP.

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