The more companies talk about labor, the tighter the market

Good news for people who pay attention to what companies are saying on earnings calls: what they say might actually mean something.

Parsing transcripts from public company earnings calls from 2002-2024, researchers at the Federal Reserve Bank of St. Louis found a very high correlation between mentions of labor issues on earnings calls and actual labor market tightness. They found that when companies are talking about labor issues, they are typically talking about them in a negative sense. “As a result, we can interpret an increase in mentions of labor issues as a situation in which firms are facing more labor issues, rather than resolving existing ones,” the researchers wrote.

That gives economists another tool in their toolbox when it comes to diagnosing labor market tightness, in addition to typical measures like the ratio of job vacancies to unemployed workers.