The old way of thinking was that a truly painful labor market is limited to recessions.

The old way of thinking was that a truly painful labor market is limited to recessions. That's why declaring and defining them so is so important. But there's evidence growing today that the pain we think of as being limited to a recession is now a permanent part of our labor market. What makes a recession so painful for workers is the freezing of movement. Imagine the labor market like the back of your watch with the cogs and gears constantly turning. Once there's movement freezing you don't have people going from job to job to unemployment to job again. It's that lack of movement — that freezing of the labor market — that makes things so painful for workers. Whether they have their job and would have a hard time feeling comfortable enough to move to a different one whether they see their wage growth start to flatten because there are so many workers or whether they have the misfortune of being an unemployed worker and the jobs that they can take are arriving at a much slower rate. But what we've seen over the past expansions is that that movement is slowing down all the time. Starting in the 1970s, the share of unemployed workers that been unemployed for 27 weeks or longer is growing at a steady pace even when the economy is expanding. Even in 2022, one of the strongest labor markets the US has ever recorded one-in-five workers had been unemployed for at least 27 weeks. Now, it's one in four. The labor market is slowing down not necessarily in the number of people who are unemployed but how hard it is to get out of unemployment. And it doesn't have to do with a recession. It doesn't have to do with the strength of demand. It has to do with the internal workings of the labor market in good or bad. And this is where the problem gets really tough. What's become a permanent part of our labor market is employer concentration. More and more labor markets are becoming less and less competitive from the employer side. One of the best ways to understand the labor market right now is to understand wages. What makes wages grow in the economy? There has been a renaissance of research among economists over the past 50 years to truly understand why wage growth has become so disappointing in the US labor market. 1. Employer concentration is increasing. 2. There are fewer rungs on the employment job ladder. 3. You need to move up the ladder to have your wages grow. 4. You fall down the ladder, and your wages fall. And these are coming together at a time when the case is growing that employers have broad power to set wages in a non-competitive market as opposed to take wages in a competitive market. Research economists have been mapping it for years to understand how this lack of competition is hurting wage growth. What we're seeing through labor market looseness through people not finding a job through an almost permanent class of long-term unemployed is just the other side of the lack of wage growth story. When you have fewer employers competing for workers those workers have a harder time finding a job.