The structral shift to service employment is fasinating, but I wonder if there's a downside we're missing. If services make the labor market more stable, does that also mean policy makers might underestimate risks until a truly catastophic shock hits? The resiliance could breed complacency in monitoring early warning signs that don't show up in monthy payroll data anymore.
That is an interesting take, and entirely possible. But in my view policy makers tend to behave in a far more risk averse fashion, taking action to prop up the economy whenever it shows any sign of weakness (such as a string of weak payroll reports). The idea that the labor market might be more resilient than policy makers give it credit for means that they could be intervening more often than is truly necessary. And this creates a perverse feedback loop where the labor market shows a sign of potential weakness, policy makers take an action (e.g. fiscal stimulus or monetary easing), the labor market doesn't end up rolling over, and the conclusion is that it was the policy maker's action(s) that prevented a recession.
The structral shift to service employment is fasinating, but I wonder if there's a downside we're missing. If services make the labor market more stable, does that also mean policy makers might underestimate risks until a truly catastophic shock hits? The resiliance could breed complacency in monitoring early warning signs that don't show up in monthy payroll data anymore.
That is an interesting take, and entirely possible. But in my view policy makers tend to behave in a far more risk averse fashion, taking action to prop up the economy whenever it shows any sign of weakness (such as a string of weak payroll reports). The idea that the labor market might be more resilient than policy makers give it credit for means that they could be intervening more often than is truly necessary. And this creates a perverse feedback loop where the labor market shows a sign of potential weakness, policy makers take an action (e.g. fiscal stimulus or monetary easing), the labor market doesn't end up rolling over, and the conclusion is that it was the policy maker's action(s) that prevented a recession.