The Fed said that it doesn't plan to raise rates until labor market conditions are consistent with MAXIMUM EMPLOYMENT.

But what is maximum employment and how far are we from it? Here is a summary indicator that gives an answer: 2.4 standard deviations as of December 2020. 1/

According to the indicator, which is a mix of 22 different aspects of the labor market, the best conditions (max employment) over the past 30 years were in 1999-2000. Back then, URs were low across the board, participation and wage growth high, jobs easy to find, etc. 2/

In the past, labor market recoveries were slow. This time, so far, it's been a lot faster. But will it continue at the recent rate?

If recovery speed form here is same as the past 2 cycles, it would be 9 yrs to max empl., or 6 yrs to pre-Covid conditions. Hopefully faster! 3/

Even if progress will be faster, it will be years before the Fed raises rates. Should be obvious, but surveys as well as option prices place high probabilities on early liftoff. Opportunity to fade. /end