Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength
26 Pages Posted: 4 Apr 2015
Date Written: August 1, 2014
As a measure of labor market strength, the raw employment-to-population ratio (EPOP) confounds employment outcomes with labor supply behavior. Movement in the EPOP depends on the relative movements of the employment rate (one minus the unemployment rate) and the labor force participation rate. This paper proposes an adjustment to the calculation of the EPOP using individual microdata to account for both individual characteristics and the probability of labor force participation, which can used to assess the strength of the labor market.
Keywords: EPOP, employment-to-population ratio, labor force participation, unemployment rate, employment rate, structural versus cyclical
JEL Classification: J64, J21, J11
Suggested Citation: Suggested Citation