In his prepared remarks, Federal Reserve Governor Waller stated that labor turnover rates have been low for the past few years compared to a decade ago. This turnover rate includes both layoffs and voluntary resignations. Hiring rates are similarly low. This is unusual because hiring rates are typically higher when the labor market is strong. Hiring rates tend to decline when the labor market is weak, and in such cases, layoff rates usually rise. What is unusual, perhaps even unprecedented, is that both hiring and layoffs are at such low levels. These data have led me to consider a question of great importance to long-term economic and monetary policy: Does a stable labor market necessarily mean a healthy labor market?
I am concerned that a labor market in a state of "low hiring, low layoffs" equilibrium indicates a decline in its dynamism, which is crucial for productivity growth and real wage levels.
If the labor market does indeed show signs of weakening dynamism, could this be a question that monetary policy needs to consider? While I don't yet have the answers to these questions, I think it's worthwhile to raise them.
