A Big-Picture Look at the Economy - February 21, 2018

Latest ECONversation Explores Labor Market Puzzles, Policy Tools

Economic intelligence comes in different forms.

First, loads of data are always involved. Statistics range from the broad—such as the measure of economic growth, which is captured by the gross domestic product (GDP)—to the specific, like the rate at which people are voluntarily leaving their jobs to seek new ones.

Then there is grassroots information from businesspeople and consumers. The Federal Reserve Bank of Atlanta amasses copious information of both kinds, analyzes it, and finds useful ways to convey it.

Atlanta Fed President Raphael Bostic digests this information as he prepares to help shape the nation's monetary policy at meetings of the Federal Open Market Committee, or FOMC. That's the central bank’s policy-making body, best known for setting the benchmark federal funds rate, the interest rate financial institutions charge one another for short-term loans of balances held at Federal Reserve banks.

In a recent ECONversations webcast, Atlanta Fed economist Paula Tkac explained how this process works. Tkac, the Bank's associate director of research, discussed how the Atlanta Fed blends the hard data and analysis with the input from business decision makers.

For example, the labor market generally appears healthy. But in explaining the Atlanta Fed's "labor market distributions spider chart," Tkac pointed out that a couple of aspects of the jobs market remain sluggish. Notably, wages have risen only slowly despite a shrinking supply of available workers.

To isolate the reasons why pay has not risen very quickly, Tkac and interviewer Charles Davidson discussed some measures employers have taken in lieu of increasing wages. Those measures, which the Atlanta Fed gathered anecdotally, most recently have included adding nonwage benefits such as extra vacation time or teleworking options.