A paper by Federal Reserve staff that will be discussed at the Brookings Institution on Friday possibly hints at the central bank’s thinking on interest rates and employment in advance of a consequential Fed meeting next week. The findings support hawks on the Federal Open Market Committee, who feel that the Fed needs to prepare to raise rates sooner than expected, although the results are still being debated and might not persuade the committee’s more dovish members.
The paper discusses the number of people who consider themselves part of the workforce — including both people who have a job and those who are looking for work. It is a measure of the total manpower available in the U.S. economy. This number, the labor force participation rate, has been decreasing steadily since 2000. Americans who can’t find work have been leaving the workforce, as have more and more retirees as the population ages.
The question now is whether there is anything that the Fed can do to slow the decline. In theory, interest rates near zero, as they have been since the financial crisis, should lead to rising prices and wages and more openings. In turn, people who are thinking of retiring might continue working, while others who retired early or just gave up on working might be coaxed back into the rat race.
That might not work, suggest the authors of the paper, who include William Wascher, a senior member of the bank’s economic staff. They argue that the number of people who aren’t working but would be if economic conditions were better is relatively small. In other words, America’s missing workers aren’t coming back. America’s labor force has shrunk, the researchers find, largely because of an aging workforce and other, larger trends, not just because of a bad job market. …
Other, larger trends is right. Like NAFTA and GATT and the WTO and all the other “free trade” agreements which profit the fed’s shareholders.