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March/April 2012, 
Vol. 94, No. 2
Posted 2012-03-01

Many Moving Parts: The Latest Look Inside the U.S. Labor Market

by David Andolfatto and Marcela M. Williams

The U.S. economy has gained roughly 2.8 million jobs since early 2010. That may be cold comfort, considering that more than 8 million jobs have been lost since the recession began. The Federal Reserve has lowered its policy rate as far as it can go, and the economy is flush with liquidity. Yet the unemployment rate remains persistently high. From policymakers to private citizens, the debate continues over what to do to help the labor market adjust. Disagreements stem, in part, from the complicated nature of the labor market itself. There are many moving parts, and the authors examine several here, pointing out that a “one size fits all” approach may not accommodate the differences across various sectors of the economy. The authors examine structural change, “frictions” in matching workers with job openings, lack of consumer and business confidence, the severity of the past recession, and other factors to help inform and illuminate this complex policy debate.