This paper discusses various concepts of unemployment rate benchmarks that are frequently used by policymakers for assessing the current state of the economy as it relates to the pursuit of both price stability and maximum employment.
The labor market conditions index (LMCI), a dynamic factor model of 19 monthly indicators, appears to be a useful tool for assessing the change in labor market conditions based on a broad array of information.
Labor market flows estimated from monthly data understate the true number of transitions by 15--25 percent, but this time aggregation bias does not meaningfully affect the cyclicality of gross flows or hazard rates.
Cyclicality in geographic mobility does not significantly affect labor market dynamics measured in the Current Population Survey.
The monthly Current Population Survey overstates employment-to-employment transitions because of time aggregation. Separations to a new job are strongly procyclical while separations to unemployment are strongly countercyclical, resulting in an acyclical total separation rate.
Total monthly job loss and hiring among U.S. workers, as well as job loss hazard rates, are strongly countercyclical, while job finding hazard rates are strongly procyclical.