Bathtubs and Labor Markets
Bathtubs can help us understand what’s happening in the labor market, Northwestern University economist Kirabo Jackson said in a piece that aired on the radio program Marketplace, which focuses on business and the economy.
The bathtub model, Jackson said, is a metaphor used in economics that’s meant to explain where unemployment is headed.
Data out Tuesday from The Conference Board indicates consumers think the tub is draining faster than it’s filling up.
“Job openings is the water going into the tub,” Jackson told senior reporter Stephanie Hughes.
Layoffs and retirements represent water leaving the tub, Hughes said. Ideally, the tub is two-thirds full – the right mix of people entering and leaving the job market. Water is not sloshing over the sides.
But when the labor market differential shrinks like it’s doing right now, it means water is draining faster than it’s filling, according to Jackson.
What’s telling, Jackson said, is that “we expect the unemployment rate to go up and the market to deteriorate to some extent.”
Jackson, the Abraham Harris Professor of Education and Social Policy at the School of Education and Social Policy, is a labor economist who studies education and social policy issues. A member of the American Academy of Arts and Sciences and the National Academy of Education, he served on the White House Council of Economic Advisers from 2023 through 2024.
Listen to the full Marketplace report.