I had two related tweetstorms this morning whose logic I want to flesh out a bit with you. They relate to the existing macro policy world we live in and how that affects outcomes. The long and short is that the outcomes are sub-optimal and I suspect the recent Fed policy shift won't change that. More detail below
I think there was some amount of labor slack still at the end of 2019, but using the overall labor force participation rate will overstate this. The overall rate includes retirement age people. They generally have LFPRs that are 1/6 to 1/2 the rate of prime working age people (pre-retirement, non school age). Because of the wave of boomers hitting retirement age since 2010, there has been significant natural demographically driven downward pressure on the overall LFPR as a larger share of the overall population heads into age groups where the LFPRS are in the 15-40% range, vs about 80% for the prime age. There could be no change in slack, and the general progression of people into retirement years would cause that.
The prime age LFPR was depressed for quite a while, but made a fairly strong comeback over the last few years, and had essentially recovered its pre financial crisis level of about 83% by the end of 2019, and nearly regained its all time high of about 84% from about the year 1999.
That said, the problem is, the types of jobs that created this recovery in LFPR arent necessarily the types of jobs that create wage pressures. Remember, the UE rate is from the household survey, so all those freelance and uber type folks show up as employed, even though they many are scraping by and have no ability to push for higher wages. There is still a ton of competition for junk jobs, which pushes those wages toward minimum wage, with no bennies. So that is one of the many reasons the phillips curve relationship broke down. Declining union membership, general uncertainty about labor market prospects and job security, the potential for your job to be outsourced rising, and other reasons also worked against wage push inflation.