Unexpectedly Intriguing!
August 21, 2007

"How much slack is there in the labor market?" That's the question King Banaian asked recently in considering recent employment data and for which he provided everything but a tool for estimating the natural rate of unemployment for the United States.

Not being labor slackers here at Political Calculations, we went straight to work to make that tool! You'll find it below, using default data for June 2007, just after the links to the relevant U.S. Bureau of Labor Statistics data reports, which are automatically updated with the most recent editions, from which you'll need to extract the indicated data:

Employment Situation (EMPSIT)

This report is produced monthly and contains the number of employed and the number of unemployed for the total U.S. civilian workforce. The appropriate data is found in Table A-1 in the data section of the report.

Job Openings and Labor Turnover (JOLTS)

This report is produced quarterly and provides the numbers of those newly hired or who have recently separated from their previous employment in the civilian workforce. This data is found in Table A of the main body of the report.

For the best results, all data should be for the same month.

BLS Employment Situation Table A-1 Data
Input Data Values
Total, Civilian Labor Force, Employed (thousands)
Total, Civilian Labor Force, Unemployed (thousands)
BLS Job Overview and Labor Turnover Table A Data
Total Hires (thousands)
Total Job Separations (thousands)

Natural Rate of Unemployment Results
Calculated Results Values
Ratio of New Hires to Number of Unemployed (%)
Ratio of Job Separations to Number of Employed (%)
Natural Rate of Unemployment (%)
Official Unemployment Rate (%)
How much slack is there in the labor market?

In the tool above, the labor market is considered to be overheating when the official rate of unemployment is below the natural rate of unemployment.

The question of how much labor market "slack" might be represented by the difference between the official and natural rates of unemployment is a good one. We've arbitrarily set the tool up to say that there's not much slack if there's only a difference of 0.5% between the two rates, but that may be too high or too low. We're open to suggestions for where to set that threshold.

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Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

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