Speech

U.S. Labor Input in Coming Years CharteredFinancialAnalystsSocietyofPhiladelphia Wilmington,Delaware November14,2006 Amajor issue facing the U.S. economy Beforeproceeding,Iwanttoemphasizethat in coming years, and facing those of theviewsIexpressherearemineanddonot us who have to try to understand the necessarilyreflectofficialpositionsoftheFederal evolutionoftheeconomy,istheprob- ReserveSystem.Ithankmycolleaguesatthe able growth rate of labor input. The issue arises FederalReserveBankofSt.Louisfortheircom- because the first wave of the baby-boom genera- ments,especiallyChristopherWheeler,senior tion is now beginning to retire. If those reaching economistintheResearchDivision,whoprovided retirement age in the near future retire at the specialassistance.However,Iretainfullrespon- same rate as those reaching retirement age over sibilityforerrors. the past ten years or so, then labor force growth will decline dramatically. In this case, the num- ber of those retiring will almost match the num- THE FRAMEWORK ber of young persons plus immigrants entering Economistsanalyzetrendsintotallaborinput the labor force. In that case, the U.S. labor force byexaminingcomponentsofthetotal.Wetypi- will grow only very slowly. Conversely, with callystartwithpopulationgrowth.Then,we only a relatively small change in retirement pat- examinethefractionofthepopulationatwork terns, labor force growth could be substantially orseekingwork.Thesumofthoseemployed higher than suggested by retirement patterns andthoseunemployedisthelaborforce.The observed in the recent past. Estimates of labor participationrateisthefraction,usuallyexpressed force growth for coming years—even as soon as asapercentage,ofthelaborforceinthepopula- next year—by various experts differ by a factor tion.Thenextstepistoexaminethesplitofthe of two. That is an enormous discrepancy. laborforcebetweenemploymentandunemploy- Laborforcegrowthmattersforanumberof ment.Finally,weneedtoexaminethebehavior reasons.ThetrendoftotalGDPgrowthisdeter- ofaveragehoursofworkofthoseemployed.This minedbythetrendofhoursworkedandgrowth analyticalframeworkprovidesawaytostudy ofoutputperhour,orproductivity.Thegrowth changesovertimeinthetotalhoursoflaborinput ofgovernmentrevenues,includingrevenuesflow- intheeconomy. ingintotheSocialSecurityandMedicaresystems, Ofthesevariousanalyticalcomponents, dependscentrallyonthegrowthoftotalnational populationgrowthandfluctuationsinthelabor output.Inthecontextofshort-runbusinesscycle forceparticipationratearequantitativelymost analysis,weintheFederalReservewillhaveto importantforunderstandingchangesintotal reachjudgmentsaboutwhetherobservedemploy- hoursoflaborinputoveraspanofafewyearsor mentgrowthisoutrunning,orfallingshort,of more.However,fluctuationsintheunemployment laborforcegrowth.I’llreturntosomeofthe rateareparticularlyimportantforunderstanding implicationsofuncertaintyoverlaborforce businesscyclefluctuationslastingafewquarters growthinmyconcludingremarks. orayearortwo.Wealsoknowthatwhenbusiness 1 ECONOMICGROWTH conditionsturnsoft,laborforceparticipation TRENDS IN LABOR FORCE declines.Somewholosetheirjobsdropoutof PARTICIPATION thelaborforceratherthancontinuetolook activelyforwork.Inthereportscompiledbythe Tobegintheanalysis,considerhowparticipa- tionrateshaveevolvedintheUnitedStatesover BureauofLaborStatistics(BLS),activejobsearch thepasthalfcentury.TheBLShascompiled isrequiredforapersonnotworkingtobeclassi- monthlystatisticsonlaborforceparticipation fiedasunemployedratherthannotinthelabor datingbackto1948.Thesefiguresarebasedona force. surveythatatpresentcoversapproximately Giventhedramaticchangesthatareaheadof 60,000households. usasthebaby-boomgenerationbeginstoretire, Whatisbyfarthemostnoticeabletrendin itmakessensetolookcloselyatissuessurround- thesestatisticsistheoverallincreaseinthepar- inglikelyfuturelaborforceparticipation. ticipationratesince1948.InJanuaryof1948, Thetotallaborforceparticipationrateis theoverallrateoflaborforceparticipationinthe measuredeachmonthbytheBLSasthefraction UnitedStateswasroughly59percent.Thisfigure ofthecivilian,non-institutionalpopulationaged heldsteadyuntiltheearly1960s,whenitbegan 16yearsorolderwhoareeitherworkingor torise,reaching61percentin1975,65percent activelyseekingwork.Theparticipationrate in1985,andjustover66percentin1995.During providesasenseofhowengagedinworkthe thefirstquarterof2000,thelaborforceparticipa- U.S.populationis.Highlevelsindicatethata tionratereacheditshighestlevelinthehistory largefractionoftheadultpopulationiseither oftheseries,hitting67.3percentoftheworking- situatedinajoborislookingforone.Wecan agepopulation. interpretahighrateofparticipation,therefore, Overthepastsixyears,however,therehas asanindicationthatthepotentialsupplyoflabor beenanotabledecrease.Laborforceparticipa- islargerelativetothesizeoftheworking-age tiondroppedfrom67.3percentinearly2000to population. 65.8percentinthefirstquarterof2005.Ithas LaborforceparticipationintheUnitedStates sincerisentojustover66percent.Themostrecent hasshowntwostrikingtrendsoverthepast50 figureavailableatthetimeofthiswriting—that years:along-runincreaseinthedecadesfollow- forOctoberof2006—was66.2percent.Inabsolute ingWorldWarIIandasignificantdeclineoverthe terms,this1percentagepointdropinthepartici- pastsixyears.Itisthislattertrend,thedecline, pationratesince2000correspondstoadecrease thathasattractedsomuchattentionamongecon- inthesizeofthelaborforceofmorethan2mil- omistsrecently,inpartbecauseitrepresentsa lionindividualsrelativetowhatitotherwise significantbreakwiththepastandinpartbecause wouldhavebeen. therearepotentiallysignificantlong-runconse- quencesassociatedwithit.Withadecreasing fractionoftheadultpopulationengagedinwork, SOME EXPLANATIONS oureconomywillhavefewerindividualspro- Howdoweexplainthesetrends,boththe ducingincomeandoutputrelativetothetotal increasebetween1965and2000,andthedecrease numberofresidentsinthecountry.Inthiscase, thereafter?Mostoftheincreaseinlaborforce theoutputofeachworkerwillhavetosustainthe participationafter1960canbeattributedtothe consumptionofalargernumberofindividuals. growingpresenceofwomeninthelabormarket. Improvingon,orevensimplymaintaining,our In1950,roughlyoneinthreewomen16years percapitastandardofliving,therefore,will ofageorolderparticipatedinthelaborforce. becomeamoredifficultgoaltoachieveinthe By1998,nearly60percentdid.Althoughthis faceofdeclininglaborforceparticipation. increaseoccurredinmostagegroups,itwaspar- 2 U.S.LaborInputinComingYears ticularlypronouncedamongwomenbetween Ofcourse,thefactthattheoverallrateofpar- theagesof25and54;thatis,womenintheso- ticipationincreasedduringthelatterhalfofthe called“prime”workingyears.Amongthese 20thcenturyindicatesthattheriseinwomen’s women,therateofparticipationrosefromless participationgreatlyoutweighedthedecline than40percentin1950tomorethan75percent amongmen.Whenviewedfromthisperspective, bytheendofthe1990s.1 theriseinfemalelaborforceparticipationwasa Asmanyeconomistshaveobserved,this crucialaspectoftheriseinoveralllaborinput increaseinwomen’sparticipationhasbeenthe and,thus,therapidexpansionoftheU.S.econ- productofseveralelements.Theimprovement omyduringthelatterhalfofthe20thcentury. inhouseholdtechnologiessimplifiedmanydaily Thesecondandmoredistressingtrendinthe tasks,suchascookingandcleaning,thereby participationrateisthesignificantdeclinesince givingthoseresponsibleforcarryingthemout thefirstquarterof2000.Recallthatinthepast greatertimetopursueotheractivities,including sixyears,theparticipationratehasdroppedby workoutsideofthehome(Hotchkiss,2005). roughlyonepercentagepoint,implyingadecrease Medicaladvancesprovidedwomenwithgreater inthesizeofthelaborforceofapproximately2 controlovertheirchild-bearingdecisions,allow- millionworkers.Tobesure,someofthisturn- ingthemtofocustoagreaterextentoneducation aroundcanbelinkedtotherecessionof2001. andthepursuitofacareer(Goldin,2004).Evolv- Economistshavelongobservedthatlaborforce ingsocialnormsalsomadeitmoreacceptable participationtendstobeprocyclical:itdecreases forwomentodelaymarriageandconcentrateon whentheeconomyweakensandincreaseswhen bothschoolingandwork,toworkwhilemarried itstrengthens. andtoworkwhileraisingsmallchildren However,thepersistentdecreaseinthepar- (Aaronsonetal.,2006).Suchchangesalsoopened ticipationrateduringtheeconomicrecovery doorstocareersinfieldssuchasbusiness,law since2001hasledmanyeconomiststobelieve andmedicine,aswellasincreasedlevelsofcom- thattherearelonger-run,structuralchangesat pensation,bothinabsolutetermsandrelativeto play.Themostsalientofthesechangesisthe theearningsofmen(Goldin,2004). agingoftheU.S.laborforceassociatedwiththe Theparticipationofmeninthelaborforce, baby-boomgeneration.Thisgroup,bornbetween incontrast,hasshownagradualdecreaseinthe 1946and1964,hasbeenestimatedtocomprise lasthalfcentury,droppingfrommorethan85 roughly78millionindividualsand,consequently, percentin1948tolessthan75percenttoday.As representsmorethanathirdoftheadultnon- withtheriseinfemaleparticipationrates,there institutionalpopulation.In2000,boomerswere arelikelymanyreasonsforthedeclineinmen’s betweentheagesof36and54—anagerangewith laborforceparticipation.Thecreationofthe aparticularlyhighrateoflaborforceparticipa- SocialSecuritySystemin1935,theriseinthe tion.In2000,approximately92percentofmen provisionofprivatepensionsfollowingthe and77percentofwomeninthisagecategory RevenueActof1942andgreatergenerosityin participatedinthelabormarket(Toossi,2005). disabilityinsurance,forexample,mayhave InadditiontotheexpandingU.S.economyduring encouragedmentoretireearlier(Hotchkiss,2005). the1990s,thisdemographicfeatureofthelabor Thedropinmen’sparticipationmayalsobetied forcelikelycontributedtothepeakingofthe totheriseinwomen’sparticipationifmarried participationrateatthistime. couplesviewmen’sandwomen’slabormarket However,after2000thebaby-boomgenera- activityassubstitutes.Acynicmightsaythat tionbegantomoveintoagecategorieswithsub- womenincreasedtheirlaborforceparticipation stantiallylowerratesoflaborforceparticipation. somencanretireearly. Recentparticipationratesamongmen55to59 1 ThesefiguresarederivedfromtheBureauofLaborStatistics:http://www.bls.gov/opub/ted/2000/feb/wk3/art03.htm. 3 ECONOMICGROWTH yearsofage,agroupintowhichtheboomers acollegedegree.Yet,itmayalsoderivefromthe becameincreasinglyrepresentedbetween2001 expansionofeducationalopportunities,particu- and2006,averaged77percentwhilethepartici- larlyatthepost-secondarylevel(Aaronson,Park pationrateforwomenwas66percent(Aaronson andSullivan,2006)aswellastheevolutionof etal.,2006).Asindividualsagebeyond60,par- socialnormsthatplaceagreateremphasison ticipationratestypicallyfallevenfurther. schoolingthaninyearspast. Theagingofthebaby-boomgeneration,how- ever,onlyrepresentsonepartoftherecentdecline inlaborforceparticipation.Asizablepartofthe THE FUTURE OF LABOR FORCE declinecanbeattributedtochangesinthebehav- PARTICIPATION iorofworkersattheoppositeendoftheagedis- tribution:teens.Between2000and2003,labor Whatdothesetrendsinlaborforceparticipa- forceparticipationamongworkersbetweenthe tionimplyaboutthefutureofU.S.laborsupply agesof16and19droppedby7.5percentage andabouttheprospectsforcontinuedgrowthin points.Sincethattime,therehasbeennoten- ourcollectivestandardofliving? dencyforteenparticipationtorebound,and Theagingofthepopulation,ofcourse,should currentratesarehoveringaround44percent continuetodecreaseaggregatelaborforcepartic- (Aaronson,ParkandSullivan,2006). ipation,andtherefore,thepotentialsupplyof Economistslookingintothistrendhave laborintheUnitedStates.AsImentionedbefore, identifiedanumberofpossibleexplanations, thebaby-boomcohortbegantoenterthe55-and- andmostbegin,onceagain,withthe2001reces- olderagecategorybackin2001,indicatingthat sion.Becauseteenworkershaveasomewhat thefractionofworkersbeyondtheirprimework- tenuousconnectiontothelabormarket,theyare ingyearswillsteadilyriseintheyearsahead.A particularlysensitivetoeconomicdownturns.It BLSstudyprojectsthatoverthenexteightyears is,therefore,notsurprisingthattheirparticipa- thefractionofindividualsovertheageof55will tionratesdroppedoffsignificantlyastheU.S. risetomorethanonethirdoftheadultpopulation economyenteredrecessionin2001. fromalevelof29percenttoday(Toossi,2005). Thefactthatthenumberofteensinthelabor TheCensusBureauprojectsthisfiguretoriseto forcehasnotreboundedinspiteoftherecovery morethan38percentby2030.Ontheotherhand, overthepast5years,however,suggeststhatthere thefractionofthepopulationinprimeworking arelonger-run,structuralfactorsbeneaththis years—thatis,between25and54—isprojected decline.Thedownwardtrendinteenparticipa- todecreasefromapproximately53percenttoday tionsincethelate1970sfurthersupportsthis to51percentby2014and45percentby2030. notion.Asitturnsout,thereappearstobeone Giventhelowerparticipationratesamong particularlyimportantreasonforthischange: olderworkers,thesetrendssuggestthatthefrac- education. tionoftheU.S.populationeitherworkingor In1987,thepercentageofindividuals lookingforajobwilldecreaseinthecoming between16and19yearsofagewhowereenrolled decades.In2005,theparticipationrateamong inschoolwasroughly61percentbutroseto73 menaged55to59wasmorethan77percent. percentin2005.Thisisaverysubstantialincrease Amongmen10yearsolder,65to69,theratewas andbycomparing2005with1987,yearswith lessthanhalfthisfigure:33.5percent.Formen similaroveralllabormarketconditions,the 70andolder,theparticipationratewasonly13.5 increaseisnotdistortedbydifferentcyclical percent(Aaronsonetal.,2006).Assumingthat conditionsinthelabormarket.Inpart,thesurge thisgeneralpatternofparticipationcontinuesto inschoolenrollmentcanbelinkedtotheincrease hold,theagingoftheU.S.populationwillnec- intheeconomicreturntoschoolingsincethe essarilyproducefurtherdeclinesinpotential late1970s,particularlythepayoffassociatedwith laborsupply. 4 U.S.LaborInputinComingYears Ofcourse,participationratesneednotremain expectancyfor65-year-oldsintheUnitedStates atcurrentlevels.Infact,thereareanumberof hasrisenbynearlyfouryearsformenandthree reasonstoexpectparticipationratesamongolder yearsforwomen.3Withgreaternumbersofpro- workerstorisesomewhatinthecomingyears. ductiveyears,individualsmaydecidetolengthen First,theageatwhichworkersmaydrawfull theircareers. benefitsfromSocialSecurityis,undercurrent Fourth,olderworkersmaychoosetoremain law,increasing.Thefullretirementageis65for employedlongertomaintainhealthinsurance individualsbornin1937orearlier,66forthose coverage.SurveysbytheKaiserFamilyFounda- bornbetween1943and1954,and67forindivid- tionandtheHealthResearchandEducational ualsbornin1960orlater.Furthermore,workers Trusthavesuggestedthatthefractionoffirms whochoosetodelayretirementuntilage70are offeringretireehealthinsurancetotheirworkers eligibleforhigherbenefits.SocialSecuritybene- decreasedbyonehalfbetween1988and2005 fitsusedtobereducedwhenapersonreceiving (Aaronsonetal.,2006).Becauseworkers,ingen- benefitsalsohadearnedincome,butthattax-like eral,donotqualifyforMedicareuntilage65, provisionhasbeeneliminated.Theseprovisions thisdevelopmentmayalsoencourageworkersto inthelaw,takentogether,mayencouragesome delayretirementuntilage65. workerstoretirelaterthanhasbeentrueofthose Indeed,wemayhavealreadyseensomeof reachingretirementageintherecentpast.How- theeffectsofthesechanges.Amongallagegroups, ever,itremainstobeseenhowlargetheeffect onlythatforworkers55yearsofageorolderhas mightbe. shownasignificantincreaseinparticipation Second,therateatwhichSocialSecurity since2000. benefitsaregrowinghasslowed,particularly Nevertheless,itisalmostcertainthatwewill whencomparedwiththedecadespriortothe seeadecreaseinthegrowthoftotallaborsupply mid-1980s.AccordingtodatafromtheSocial overthenextseveraldecades.Eventhoughwe SecurityAdministration,realaveragemonthly mightreasonablyprojectincreasesinparticipation benefitsroseby88percentbetween1965and amongolderAmericans,ratesofparticipation 1985.Between1985and2004,theyincreasedby amongthose55yearsofageandolderwillstill 23percent.2SocialSecuritybenefitstodayrepre- besubstantiallylowerthanamongindividuals sentasubstantialfractionoftheaveragehouse- ofprimeworkingage.Hence,asourpopulation hold’sretirementincome—indeed,SocialSecurity growsolder,overallparticipationwilldecline. benefitsrepresentmorethanhalfoftotalincome Onthispoint,researcherstendtoagree.Although for65percentofthebeneficiaries(SocialSecurity theexactprojectionsoforganizationssuchasthe Bulletin:AnnualStatisticalSupplement,2005). CongressionalBudgetOffice,theBureauofLabor Giventhisfact,thedecreasedrateofgrowthin StatisticsandtheSocialSecurityAdministration benefitsovertimemayleadsomeretireestosup- differ,allexpectadeclineintheparticipation plementtheirSocialSecuritybenefits.Takinga rateintheyearsahead. job,ofcourse,isonepossibleoption.Reaching Ofcourse,adeclineintherateofparticipation retirementagemaynotnecessarilymeanretire- doesnotnecessarilyimplythateitherthelevel ment.Somemayseekanothercareer,orpartial of,orrateofchangein,laborsupplyitselfwill retirement. decrease,becausetheU.S.populationcontinues Athirddevelopmentthatcouldincreasethe togrow.Smallerfractionsofalargertotalpopu- laborforceparticipationrateamongolderwork- lationmaystilltranslateintogreaterabsolute ersisincreasedlifeexpectancy.Since1970,life numbersofpeopleworkingovertime.Unfortu- 2 ThesearederivedfromtheSocialSecurityBulletin:AnnualStatisticalSupplement,2005. 3 ThesestatisticsarederivedfromtheNationalCenterforHealthStatisticsathttp://www.cdc.gov/nchs/fastats/lifexpec.htm. 5 ECONOMICGROWTH nately,twoadditionaltrendsareworkingagainst avenuestoaddressthechallengesahead.We thispossibility.First,whiletheU.S.population shouldnotruleoutadditionalstepstoencourage isgrowing,itsrateofgrowthislikelytoslowin thosewhomightotherwiseretiretoremainin thefuture.Second,formanydecades,therehas thelaborforcelonger.Andweneedtoexamine beenaseculardecreaseintheaverageweekly waystoincreaseproductivity—toobtainmore hoursworkedbyemployeesinthenon-farmU.S. outputperhouroflaborinput. businesssector,andthisdecreaseisunlikelyto Ournation’scapitalstock—ourofficebuild- turnaroundincomingyears(Aaronsonetal., ings,factoriesandequipment—islikelabor,a 2006). fundamentalinputintotheproductionofgoods andservices.Increasingourcapitalstock,there- fore,providesameanstoboostproductioninthe IMPLICATIONS FOR THE U.S. faceofdeclininglaborinput.Becauseinvestment incapitaldependsdirectlyonhowmuchour ECONOMY’S FUTURE economy,includingourfederalgovernment,saves, Iftheseprojectionsholdtrue,theU.S.econ- itisinourinteresttoplacegreateremphasison omywillfacesomedauntingchallengesinthe policiesthatencouragehigherratesofsaving. comingdecades.Inparticular,becauselabor Wecanincreasetheproductivityofworking representsthelargestsingleinputinU.S.produc- individualsbyincreasinglevelsofeducation tion,GDP—whichmeasuresthetotalvalueof amongourpopulation.Policiesaimedatimprov- thegoodsandservicesoureconomygenerates— ingtheeffectivenessofprimaryandsecondary maybegintoexhibitslowerratesofgrowthover education,curtailingtherateatwhichstudents time.Becauseincomeforthecountryasawhole dropoutofschoolandincreasingaccesstopost- dependsonproduction,slowergrowthinGDP secondaryeducation,forexample,wouldbe andincomeimpliesslowergrowthinconsump- instrumentalinmakingourlaborforcemore tionofU.S.households.Thus,adecreaseinlabor productive. supplygrowthwillleadtoslowergrowthinour Productivityalsodependsondeveloping well-being. moreefficientproductionmethods;thatis,on Inaddition,asnotedrecentlybyFed thecreationofnewideasanddiscoveriesthrough ChairmanBenBernanke,adecreaseinthefrac- research.Arecentstudyoflong-runtrendsin tionoftheU.S.populationatworkwillpresenta economicgrowthsuggeststhatroughlyhalfof numberoffiscalchallengesforourgovernment.4 theU.S.economy’sgrowthduringthesecond Mostobviously,astherateoflaborincomegrowth halfofthe20thcenturycanbelinkedtorising slows,thegrowthoftaxrevenuewillalsobegin researchactivity(Jones,2002).Continueddevo- todiminish,threateningtheviabilityofprograms tionofresourcestoscientificresearch,therefore, suchasSocialSecurityandMedicare,whichhave wouldhelptoensurethatoureconomycontinues outlaysthatareexpectedtodoubleasafraction toexpand.Translatingresearchintoactualpro- ofGDPby2050,aswellasourabilitytoincrease ductionrequiresthatweenhance,wherepossible, discretionaryspending,includingmilitary entrepreneurialactivitybymaintainingadequate expenditures. rewardsandreducingburdensomeregulation Howmightwerespondtothesechallenges? thatyieldsmorecoststhanbenefits. Thecurrentpathofspendingandtaxation,cer- Economists,ofcourse,havelongstressed tainly,canbealtered,andsuggestionsofthistype thatproductivitygrowthisthekeytorisingliving havebeenofferedbymanyinfluentialwriters standards,andperhapsaccordingly,haveoffered andspeakers.Weshouldbeopentomultiple suggestionssimilartothoseIhavejustoutlined. 4 Theseremarks,entitled“TheComingDemographicTransition:WillWeTreatFutureGenerationsFairly?”weregivenattheWashington EconomicClubonOctober4,2006. 6 U.S.LaborInputinComingYears Iwouldliketostress,however,thatthestakesof tionstartingtoretire,we’llhavetochangeour notpursuingthesetypesofstrategiesarelikely viewofnormaljobcreation.Nottodosowill toriseintheyearsahead.Inthefaceofanimpend- inviteaseriousmisperceptionofthestateofthe ingslowdowninthegrowthofoureconomy’s labormarket. laborforce,productivitygrowthhasbecomemore Uncertaintyovertrendlaborforcegrowth crucialthanever. willcomplicatetheFed’sjobnextyear.Whilewe knowthatthereisnolong-runtradeoffbetween inflationandunemployment,policymakerstry CONCLUDING REMARKS tomaintainanequilibriuminthelabormarketat approximatelyfullemploymentbothbecausefull Althoughthedirectionofeffectsfromthe employmentisanimportantgoalandbecause agingbaby-boomgenerationonlaborforcegrowth avoidingshort-runstrainsinthelabormarket isclear,themagnitudeisnot.Apaperpublished helpstomaintainpricestability.Ifactualemploy- earlierthisyearintheBrookingsPaperson mentgrowthslows,wewillhavetomakethe EconomicActivity(Aaronsonetal.,2006)con- judgmentastowhethertheslowingisconsistent tainsasummarytablereportingfourdifferent withaslowingoftrendlaborforcegrowthoris projectionsoflaborforcegrowthoutto2014based asignofimpendingrecession.Ifemployment ontheauthors’modelandestimatesfromthe growthnextyearremainsonlymodestlybelow CongressionalBudgetOffice,theBureauofLabor thisyear’saveragepaceofabout150,000per StatisticsandtheSocialSecurityAdministration. month,wewillhavetomakethejudgmentasto For2007,theprojectionsrangefromalowof0.6 whetherthisgrowthisoutrunningavailablelabor, percentgrowthtoahighof1.1percentgrowth. whichwouldbethecaseifweacceptthelow For2014,theprojectionsrangefromalowof0.2 estimateoftrendlaborforcegrowth,orwhether percenttoahighof0.8percent. oneofthehigherestimatesoftrendlaborforce Themagnitudeofthesedifferencesisstun- growthisbeingrealized.Tomakethisjudgment, ning.Basedontheseprojections,iftheunemploy- wewillhavetocollateasmanydifferentscraps mentrateremainsaboutsteadynextyearwecan ofinformationwecanfindtosupplementthe expectaveragemonthlygrowthofemployment standardlaborforcestatisticsreleasedevery rangingfromalowofabout70,000toahighof month. about120,000.Thesearerough,roundedoffesti- Formanyyearsnoweconomistshavebeen mates—toprovidetheestimatesanyotherway discussingthelong-runimplicationsofretirement wouldimplyafalsesenseofprecision.Onthe ofthebaby-boomgeneration.AndIsuspectthat samebasis,in2014,therangeisfromabout thosedebateswillintensifynowthattheretire- 30,000toabout100,000newjobseachmonth. mentwaveisbeginning.Whatwedidnotexpect Theseareverylargedifferences.Moreover,given isthattherewouldbesomuchuncertaintyabout thateachofthemodelsusedtoproducethese thesizeofthewavewhenitstarted.Thelifeof estimatesissubjecttoerror,infacttherangeof themonetarypolicymakerisalwaysinteresting, uncertaintyisevengreaterthanthenumbersjust thatisforsure! quoted. Itisimportanttodigestnotonlythelarge differencesintheseestimatesbutalsothelarge REFERENCES changenowtakingplaceinthelabormarket. From1996through1999,webecameaccustomed Aaronson,Daniel;Park,Kyung-HongandSullivan, tojobgrowthintheneighborhoodof250,000per Daniel.“TheDeclineinTeenLaborForce month.In2004-05,jobgrowthaveragedabout Participation.”FederalReserveBankofChicago 170,000permonth.Withthebaby-boomgenera- EconomicPerspectives,2006,pp.2-18. 7 ECONOMICGROWTH Aaronson,Stephanie;Fallick,Bruce;Figura,Andrew; Pingle,JonathanandWascher,William.“TheRecent DeclineintheLaborForceParticipationRateand ItsImplicationsforPotentialLaborSupply.” BrookingsPapersonEconomicActivity,2006,1, pp.69-154. Goldin,Claudia.“FromtheValleytotheSummit: TheQuietRevolutionthatTransformedWomen’s Work.”NBERWorkingPaper10335,2004. Hotchkiss,Julie.“What’sUpwiththeDeclinein FemaleLaborForceParticipation?”WorkingPaper 2005-18,FederalReserveBankofAtlanta,2005. Jones,CharlesI.“SourcesofU.S.EconomicGrowth inaWorldofIdeas.”AmericanEconomicReview, 2002,92(1),pp.220-39. Munnell,AliciaandSunden,Annika.“401(k)Plans areStillComingUpShort.”BostonCollegeCenter forRetirementResearchBrief,March2006,pp.1-9. Toossi,Mitra.”LaborForceProjectionsto2014: RetiringBoomers.”MonthlyLaborReview, November2005,pp.25-44. 8

William Poole (2006, November 13). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_20061114_poole

@misc{wtfs_speech_20061114_poole,
  author = {William Poole},
  title = {Speech},
  year = {2006},
  month = {Nov},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_20061114_poole},
  note = {Retrieved via When the Fed Speaks corpus}
}