U.S. Labor Market Will Tighten Substantially: Deutsche Bank

As labor force participation returns to a declining trend, the labor market in the U.S. will tighten much further unless productivity growth picks up dramatically, believe analysts at Deutsche Bank. Peter Hooper and colleagues said in their April 20 research note titled “Productivity down, participation up: US labor market improving” that the FOMC should have the luxury of moving cautiously this year.

Plunging U.S. labor productivity growth

The DB analysts note that in the past five years, U.S. labor productivity growth has plunged to its lowest rate in more than three decades. They highlight that over the 25 years leading up to and through the great financial crisis, U.S. labor productivity growth in the non-farm business sector generally averaged more than 2% per year....