Just a quick review of employment. Flows into and out of employment are now at levels that correspond to previous labor market peaks, when the unemployment rate was 4% to 4.5%. Flows between unemployed and not in labor force are still elevated - signaling an unemployment rate closer to 6%. We are well into a full-employment labor market, with an appended group of marginal workers.
I wonder how much of this marginal worker problem would disappear if mortgage levels began to expand again, leading to homebuilding. The construction unemployment rate has fallen back to full-employment levels, but the total amount of construction employment remains about 0.5% to 1% below the level that it was in any previous expansion period. That just happens to match the difference between the unemployment rate levels implied by flows. Have we kept the construction market so dysfunctional for so long that construction workers identify as marginalized workers now instead of as unemployed construction workers?
Nothing is so pro-cyclical and "bubble" prone as public political opinions.