Kevin L. Kliesen

William T. Gavin

English

Research Papers in Economics

NationalEconomicTrends
February 2000
Available Labor Supply
In a recent speech, Fed Chairman Alan Greenspan
mentioned the potential inflationary consequences of
a dwindling supply of available workers:
“[O]ver the past two years, the pool of people 
seeking jobs—the sum of the officially unem-
ployed plus those not in the labor force but 
wanting to work—has declined from 11.2 million
to 9.6 million.  The number of workers drawn 
into employment in excess of the normal 
growth in the workforce has been running at 
the equivalent of roughly a half of a percentage 
point of annual GDP growth.  This gap must 
also eventually be closed if inflationary imbal-
ances are to continue to be contained.”1
In 1999, the unemployment rate for workers 16-
years old or over was 4.2 percent, the lowest since
1969 when it was 3.5 percent.  The labor force is the
sum of the employed and the unemployed.  The unem-
ployed category includes only people who are actively
seeking work.  The measure of available labor supply
described above includes the people aged 16 to 64 who
are unemployed as well as those aged 16 to 64 who are
not counted in the labor force, but say they want to
work.  The accompanying figure shows the available
labor supply and its two components: the unemployed
and those who say they want to work.  
Data on the people who say they want to work
come from the monthly Current Population Survey
(CPS).  The survey questions concerning whether a
respondent would be willing to work were revamped
in 1994.  Therefore, a consistent time series on these
workers only goes back to January 1994.  The total
available labor supply declined from 14.9 million in
January 1994 to 9.7 million in December 1999.
During this period, the ratio of people not in the labor
force saying they want to work remained roughly
constant at about three-quarters of the number unem-
ployed.  Since 1994, the number of unemployed
declined by about 2.9 million and the number of
those wanting to work, but not in the labor force—the
second component of the available labor supply mea-
sure—declined by 2.3 million.  
Most of the decline in the pool of people seeking
jobs are workers in the prime earning years of their
life, ages 25-54.  This is the case for both the officially
unemployed and for others wanting to work.  It is
interesting to note, however, that more than half of
the decline in the number of others wanting to work
were women getting jobs, whereas more than half of
the decline in the number of unemployed were men
finding work.  
Interest in this measure of available labor supply has
risen as the unemployment rate has fallen to historic
lows, yet inflation pressures remain largely absent.
Changes in the available labor supply have moved in
parallel with the number of unemployed, suggesting that
this alternative measure does not, by itself, explain the
absence of inflation pressures in this tight labor market.
—William T. Gavin
—Kevin L. Kliesen
1This quote is from an October 28, 1999, speech by Federal Reserve 
Chairman Alan Greenspan, “Information, Productivity, and Capital Investment.”
Views expressed do not necessarily reflect official positions of the Federal Reserve System
Available Labor Supply
Number of Workers (in thousands)
18,000
14,000
10,000
6,000
2,000
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99
Note:  These totals do not include workers over 64 years old.
Available Labor Supply
Unemployed
People who say they want to work

Available labor supply

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Available labor supply

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