Non-compete agreements (NCAs) are pervasive even in low-wage labor markets, yet most evidence relies on variation in enforceability rather than NCA incidence. Using longitudinal data from the NLSY97, we study how signing an NCA affects wage trajectories and job tenure. Exploiting complete work histories and applying a clean-controls local projections difference-in-difference design, we find a striking divergence: NCAs are associated with significantly slower wage growth for low-education workers over four years, but faster wage growth for high-education workers. Effects on job tenure are imprecisely estimated for both groups.

Interpreting real-time labor market conditions is challenging because commonly used indicators are noisy, revised over time, and often send conflicting signals. In practice, policymakers and market participants describe labor market developments using a shared narrative language centered on labor demand, labor supply, and matching frictions. In this paper, we show that empirical measures of these narrative concepts can be recovered from latent factors that summarize the joint movements of a broad set of high-frequency U.S. labor-market indicators. We use ninety-four labor-market indicators, over the period from 1960 to 2026, and construct measures for labor demand, long-run labor supply, short-run labor supply, and matching efficiency by selecting the factors that satisfy a limited set of restrictions on how underlying forces map into observed data. We find that labor demand and short-run labor supply account for most of the common variation in labor-market indicators. Our results also show that assigning narrow interpretations to individual indicators can lead to misleading conclusions about underlying labor market conditions. Applying the framework to the post-pandemic period reveals that although labor demand recovered briskly after the acute phase of the pandemic, it cannot account for the large rise in vacancies and quits. Instead, movements in short-run labor supply and matching efficiency play a central role. We also show that the “soft-landing” episode from 2023 through 2025 was characterized by a joint decline in labor demand and short-run labor supply, which slowed payroll growth while generating only a moderate increase in the unemployment rate.

Macroeconomic models and policymakers' language have evolved significantly. Today's policy discussions center on New Keynesian (NK) synthesis, which builds on the neoclassical growth model and the AS-AD framework. It incorporates nominal and real rigidities, financial and labor market frictions, and the importance of expectations, and it inspired terms policymaker terms such as “inflation expectations” and “forward guidance.” While essential for communication during the Great Recession and COVID-19 pandemic, these events also revealed the NK model's limitations. Newer models incorporating heterogeneous agents potentially offer richer policy insights but add complexity and the challenge of distilling their main policy implications going forward.

We study the efficiency of non-compete agreements (NCAs) in an equilibrium model of labor turnover. The model is consistent with empirical studies showing that NCAs reduce turnover, average wages, and wage dispersion for low-wage workers. But the model also predicts that NCAs, by reducing turnover, raise recruitment and employment. We show that optimal NCA policy: (i) is characterized by a Hosios like condition that balances the benefits of higher employment against the costs of inefficient congestion and poaching; (ii) depends critically on the minimum wage, such that enforcing NCAs can be efficient with a sufficiently high minimum wage; and (iii) alone cannot always achieve efficiency, also true of a minimum wage-yet with both instruments efficiency is always attainable. To guide policy makers, we derive a sufficient statistic in the form of an easily computed employment threshold above which NCAs are necessarily inefficiently restrictive, and show that employment levels in current low-wage U.S. labor markets are typically above this threshold. Finally, we calibrate the model to show that Oregon's 2008 ban of NCAs for low-wage workers increased welfare, albeit modestly (by roughly 0.1%), and that if policy makers had also raised the minimum wage to its optimal level (a 30% increase), welfare would have increased more substantially-by over 1%.

We show that a negative relative demand shock in a sector with downwardly rigid prices, like the service sector, can generate substantial inflation.Such a shock induces an equilibrium decline in the relative price of services.If price adjustment costs are non-existent or symmetric, then this takes place through a simultaneous decline in services prices and increase in goods prices, resulting in, on net, little inflation.If prices in the services sector are downwardly rigid, however, this takes place mostly through an increase in goods prices, resulting in inflation.To illustrate the relevance of this mechanism in practice we provide evidence on the downward rigidity of person-to-person service prices during the Covid pandemic of 2020-2021.We then introduce downward price rigidities in a multisector New-Keynesian model and show how they can result in inflationary relative demand shocks.

We use a new growth accounting method to quantify the drivers of world total factor productivity (TFP) growth during 1996–2014 and uncover four main results. World productivity growth is volatile from year to year. This mainly reflects reallocation of labor across country-industries. The contribution of country-industry level productivity growth to world productivity is relatively constant over time. This constancy masks that the increased importance of emerging economies offsets a productivity slowdown in advanced economies. After 2008, this offsetting effect dissipated and world TFP growth declined. These conclusions are robust to the inclusion of markups in the analysis. (JEL E23, E32, O30, O47)

During the Second Industrial Revolution, in the late nineteenth century, the proliferation of automation technologies coincided with substantial job creation but also a “hollowing out” of middle-skilled job opportunities, which historically offered reliable paths to prosperity. We use recently linked U.S. census data to document three main facts: (i) declining demand for middle-skilled labor in manufacturing corresponded to greater reallocation of workers into comparatively less-skilled occupations; (ii) older workers were more likely to switch to unskilled physical labor; (iii) younger workers led switching into growing occupations affected by automation technologies.

The Phillips curve captures the empirical inverse relationship between the level of inflation and unemployment. The reciprocal of its slope, sometimes referred to as the “sacrifice ratio,” represents the increase in the unemployment rate associated with a 1 percentage point reduction in the inflation rate. In this Chicago Fed Letter , we provide evidence that the Phillips curve has steepened in many industrialized countries since the start of the recovery from the Covid-19 pandemic. This suggests a lower sacrifice ratio now than before 2020. 1 The gist of our main result is apparent in figure 1, which shows the Phillips curves of the United States, United Kingdom, and France during two time periods: the seven years (or 28 quarters) before the pandemic (2013:Q1–2019:Q4) and the six quarters of the recovery for which we have data (2021:Q1–2022:Q2). 2 These three countries’ Phillips curves have steepened significantly during the recovery, in stark contrast with their flat Phillips curves of the pre-pandemic period. Before the pandemic, the U.S. Phillips curve had been flattening for over a decade 3 and was considered “dead” by many economists. 4 It appears this pattern has sharply reversed over the first six quarters following 2020. In the rest of this article, we show that Phillips curves have steepened across a sample of 29 industrialized countries using data from the Organisation for Economic Co-operation and Development (OECD). 5 This change in the relationship between unemployment and inflation is robust to the inclusion of crude oil prices, inflation expectations, and other measures of economic slack besides the unemployment gap. 6 What drives our results is that declines in unemployment rates are associated with larger increases in inflation rates during the recovery from the pandemic than during the pre-pandemic period. Our results are generally the same when we examine countries individually (within-country variation) or when we study them pooled together (cross-country variation).

Aggregate U.S. labor market dynamics are well approximated by a dual labor market supplemented with a third, predominantly, home-production segment. We uncover this structure by estimating a Hidden Markov Model, a machine-learning method. The different market segments are identified through (in-)equality constraints on labor market transition probabilities. This method yields time series of stocks and flows for the three segments for 1980-2021. Workers in the primary sector, who make up around 55 percent of the population, are almost always employed and rarely experience unemployment. The secondary sector, which constitutes 14 percent of the population, absorbs most of the short-run fluctuations, both at seasonal and business cycle frequencies. Workers in this segment experience six times higher turnover rates than those in the primary tier and are ten times more likely to be unemployed than their primary counterparts. The tertiary segment consists of workers who infrequently participate in the labor market but nevertheless experience unemployment when they try to enter the labor force. Our individual-level analysis shows that observable demographic characteristics only explain a small part of the cross-individual variation in segment membership. The combination of the aggregate and individual-level evidence we provide points to dualism in the U.S. labor market being an equilibrium division of labor, under labor market imperfections, that minimizes adjustment costs in response to predictable seasonal as well as unpredictable business cycle fluctuations.

We introduce a decomposition of the growth in real median usual weekly earnings of full-time wage and salary earners into parts due to earnings increases of those who remain employed, the intensive margin, and due to changes in those who are employed, the extensive margin. The intensive margin is procyclical and dominates during expansions. The extensive margin is countercyclical and important during downturns, especially during the Great and COVID Recessions. The extensive margin is mainly driven by entries from and exits to part-time employment and nonparticipation, not unemployment.

In June 2022, the 12-month inflation rate of the U.S. Consumer Price Index (CPI) hit 9.1%, its highest level in over 40 years. The U.S. is not alone: Across the industrialized world, inflation is accelerating during the recovery from the pandemic recession. Although inflation is surging globally, the sources of inflation are different in each country. In this Chicago Fed Letter, we document four facts about where the U.S. stands amid the global inflation surge:

Since the start of the pandemic the U.S. labor market has been characterized as being plagued by missing jobs , i.e. payroll employment has fallen more than five million jobs short of its pre-pandemic trend, and missing workers , i.e. the participation rate has declined by 1.2 percentage points: A pandemic-induced shortage of workers has restrained job creation and, as a result, been a substantial drag on post-pandemic job growth. In this paper, we show that this is a misinterpretation of the data for two reasons. The first is that the number of missing jobs is inflated because it is based on the unrealistic assumption that the pre-pandemic tailwinds for job growth from the decline in the unemployment rate and cyclical upward pressures on participation would have continued in 2020 and beyond if the pandemic would not have occurred. Second, the number of workers missing due to COVID is overstated because the bulk of the 1.2 percentage-point decline in the participation rate since the start of the pandemic reflects a continuation of its long-run downward trend that was already part of projections before the pandemic broke out. Instead, our payroll jobs accounting yields a 810 thousand cyclical shortfall in payroll jobs in October 2022 compared to right before the pandemic. At the recent pace of job growth, even without monetary and fiscal tightening, we expect a substantial deceleration of payroll growth in the coming months.

Using price quote data that underpin the official U.K. consumer price index (CPI), we analyze the effects of the unexpected passing of the Brexit referendum on the dynamics of price adjustments. The sizable depreciation of the British pound that immediately followed Brexit works as a quasi-experiment, enabling us to study the transmission of a large common marginal cost shock to inflation as well as the distribution of prices within granular product categories. The bulk of the aggregate inflationary effect is attributable to the size of price adjustments, an aspect matched well by the time-dependent price-setting model. The state-dependent model fares better in capturing the endogenous selection of price changes at the lower end of the price distribution. Both models miss on the magnitude of the adjustment conditional on selection. (c) 2021 Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http:// creativecommons.org/licenses/by-nc-nd/4.0/).

We investigate the source, magnitude, and unevenness of the procyclical forces that shape labor force participation, i.e., the participation cycle, which are important for the implementation of the maximum employment mandate.We show that these forces can be analyzed in real time using a flow decomposition of the changes in the labor force participation rate.The decomposition reveals that the source of the participation cycle is fluctuations in job-loss and job-finding rates, rather than cyclical movements in labor force entry and exit rates.The magnitude of the participation cycle is large.Cyclical downward pressures on employment from participation are two-thirds that of unemployment.Moreover, the participation cycle delays the recovery in employment because it lags the unemployment cycle.It also amplifies the unevenness of the impact of recessions.Groups that see large increases in their unemployment rates also experience more pronounced participation cycles.Despite differences in their magnitudes, the source of the participation cycle is the same for all groups.Application of our method to the COVID-19 Recession suggests that, as of June 2021, the bulk of the drop in the participation rate since the onset of the pandemic is cyclical and that the cyclical recovery in participation likely will trail that of the unemployment rate.

Despite a sharp spike in unemployment since March 2020, aggregate wage growth has accelerated. This acceleration has been almost entirely attributable to job losses among low-wage workers. Wage growth for those who remain employed has been flat. This pattern is not unique to COVID-19 but is more profound now than in previous recessions. This means that, in the wake of the virus, evaluations of the labor market must rely on a dashboard of indicators, rather than any single measure, to paint a complete picture of the losses and the recovery.