Cyclical signals from the labor market

Tino Berger, Paul David Boll, James Morley, Benjamin Wong

Research output: Contribution to journalArticleResearchpeer-review


We consider which labor market variables are the most informative for estimating and nowcasting the US output gap using a multivariate trend-cycle decomposition. Although the unemployment rate clearly contains important cyclical information, it also appears to reflect more persistent movements related to labor force participation that could distort inferences about the output gap. Instead, we show that the alternative U-2 unemployment rate (job losers as a percentage of the labor force) provides a more purely cyclical indicator of labor market conditions. To a lesser extent, but consistent with a link of the output gap to real labor costs in a
New Keynesian setting, we also find that average hourly earnings are informative about the output gap.
Original languageEnglish
Article numberodab002
Number of pages16
JournalOxford Open Economics
Publication statusPublished - 2022


  • nowcasting
  • output gap
  • Covid-19
  • U-2 unemployment rate
  • average hourly earnings

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