NEW YORK - A key measure of the U.S. labor market appears to exaggerate the damage brought on by the Great Recession, according to a fresh study by the Federal Reserve Bank of New York, suggesting the job market may be closer than previously thought to a full recovery. These "Demographic factors are exerting downward pressure on the actual E/P rate, suggesting that the recent lack of improvement in the E/P ratio does not imply a lack of progress in the labor market," they said. Fed policymakers, bound by law to achieve full employment and price stability, may take note as they try to predict when the amount of so-called slack in the labor market will diminish, leading to inflationary wage pressures. While San Francisco Fed President John Williams said in September that the low employment-to-population ratio is sending a much too pessimistic signal on the job market, Ben Bernanke, who stepped down as Fed chairman on Friday, said in November the ratio overstates the degree of slack in the labor market.
Source: REUTERS
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