Sharp Drop in U.S. Labor Force Participation Rate Sparks Debate Over Causes
Macro
The U.S. labor force participation rate, which measures the share of people working or actively looking for work, has fallen sharply, and opinions are divided over the reasons. The pace of decline over the past six months is among the fastest in statistical history, and it has also contributed to pushing down the unemployment rate, which stood at 4.1% in July, its lowest level in over a year. Michael Gapen of Morgan Stanley notes that if persistent factors such as an aging population and changes in immigration policy are the main causes, the unemployment rate will remain low, but if seasonal fluctuations or a temporary hiring slump are significant, there is an upside risk to the unemployment rate toward the end of the year. Possible factors include a wave of retirements, immigration enforcement, seasonal noise, and weak demand. The August jobs report, due out on the 4th, will provide clues to the debate.
