United States: Selected Issues

July 23, 2014

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Format: Chicago

United States: Selected Issues, (USA: International Monetary Fund, 2014) accessed November 8, 2024

Summary

This Selected Issues paper on the United States of America examines the recent US labor force penetration rate (LFPR) dynamics. LFPR dynamics can be driven by structural factors and cyclical ones related to job prospects. With participation rates for older workers lower than for prime age workers, demographic models suggest that aging of the baby boom generation explains about 50 percent of the near 3p.p. LFPR decline during 2007–2013. State-level panel regression analysis is used to tie down the cyclical effect, which is estimated to account for about 30–40 percent of the decline. Significant remaining slack in the labor market points to an important role for macroeconomic and labor supply policies. This suggests a still important role for stimulative macroeconomic policies to help reach full employment. Macroeconomic policy should remain accommodative for a while given sizeable labor market slack. This slack goes beyond that signaled by the unemployment rate and takes account of the LFPR being below trend and many employees working part time ‘involuntarily’.

Subject: Aging, Central bank policy rate, Financial services, Labor, Population and demographics, Production, Total factor productivity, Unemployment

Keywords: Aging, Caribbean, Central bank policy rate, CR, Europe, Fed fund, Fed funds lending, Federal funds rate, Global, ISCR, LFPR decline, LFPR dynamics, North America, Policy uncertainty, TFP growth, Total factor productivity, Unemployment

Publication Details

Pages:

113
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2014/222
Stock No:

1USAEA2014002
ISBN:

9781498331104
ISSN:

1934-7685

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