U.S. Fed’s Fischer: Participation Drop May Reflect Slow Growth

Federal Reserve Vice Chairman Stanley Fischer said sluggish labor supply growth is a “source of concern” because it may contribute to a slowdown in longer-run output of the economy, which also faces a drag from housing and “broad based” slowing across emerging markets.

Falling labor-force participation largely reflects an aging population, though there’s “considerable uncertainty” about how much is due to the sluggish economy, Fischer said today in remarks prepared for delivery in Stockholm. The participation rate, which measures the share of working-age people in the labor force, is 62.9 percent, near the lowest since 1978.

“There are good reasons to believe that some of the surprising weakness in labor-force participation reflects still poor cyclical conditions,” Fischer said. “Many of those who dropped out of the labor force may be discouraged workers. Further strengthening of the economy will likely pull some of these workers back into the labor market, although skills and networks may have depreciated some over the past years.”

Bloomberg

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