How Tight Is the U.S. Labor Market?

The latest jobs report showed an unemployment rate of 4.7% for February, according to the Bureau of Labor Statistics (BLS). This jobless rate is considerably lower than the historical average of 5.8% since 1948 and has fallen below its levels during the labor market peaks of 1979 and 1989 (Figure 1, blue line). The expectation that the rate will fall even further raises the possibility that the labor market will exceed the Federal Reserve’s goal of maximum employment and could push up wages and prices substantially.