{"id":132400,"date":"2025-09-04T14:14:08","date_gmt":"2025-09-04T14:14:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/132400\/"},"modified":"2025-09-04T14:14:08","modified_gmt":"2025-09-04T14:14:08","slug":"the-declining-labor-supply-the-jobless-rate-and-fed-policy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/132400\/","title":{"rendered":"The declining labor supply, the jobless rate and Fed policy"},"content":{"rendered":"<p>Economists have long understood that demographic changes would result in slower growth in the labor supply as baby boomers retire.<\/p>\n<p>But when those changes are combined with a meaningful shift in immigration policy, the result is a decline in labor force participation.<\/p>\n<p>That decline is partially masking the softness in the labor market as the unemployment rate sits at 4.24% even as the breakeven level of jobs needed to keep employment conditions stable has declined to about 50,000.<\/p>\n<p>To examine this, we conducted a simple exercise in which we held the labor force participation rate at its 2023-24 average to estimate what the current unemployment rate would be otherwise.<\/p>\n<p><a href=\"https:\/\/realeconomy.wpenginepowered.com\/wp-content\/uploads\/2025\/09\/9_4_2025_MM_jobs_SUB.jpg\" target=\"_blank\" rel=\"noopener nofollow\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-26795 size-mailchimp-images\" src=\"https:\/\/realeconomy.wpenginepowered.com\/wp-content\/uploads\/2025\/09\/9_4_2025_MM_jobs_SUB-560x340.jpg\" alt=\"\" width=\"560\" height=\"340\"  \/><\/a><\/p>\n<p>\u00a0<\/p>\n<p>If the labor force participation rate had held at its 2023-24 average of 62.6% and all else remained the same, the unemployment rate would be sitting near 4.85% compared with the current 4.24%.<\/p>\n<p>This dynamic suggests that the path is open for the Federal Reserve to adopt a risk management stance with respect to the labor market and growth through a 25 basis-point rate cut at its meeting on Sept. 17.<\/p>\n<p>Get Joe Brusuelas\u2019s Market Minute economic commentary every morning.<a href=\"https:\/\/realeconomy.rsmus.com\/subscribe-to-market-minute\/\" rel=\"nofollow noopener\" target=\"_blank\"> Subscribe now<\/a>.<\/p>\n<p>Such a reduction, however, would most likely not alter the growing suspicion among investors that the Fed is now prepared to tolerate inflation closer to 3% compared with the official 2% target.<\/p>\n<p>That view is part of an evolving market narrative where the U.S. Treasury curve falls at the short end and rises at the long end. The 2-year has fallen by 76 basis points from its peak on Jan. 13, while the 30-year has increased by 48 basis points since its recent low on April 4.<\/p>\n<p>Given that inflation is likely to continue rising points to the possibility that, with a rate cut, longer-term rates along the curve from 5 years to 30 years may increase as they did following the Fed\u2019s rate reductions last September.<\/p>\n","protected":false},"excerpt":{"rendered":"Economists have long understood that demographic changes would result in slower growth in the labor supply as baby&hellip;\n","protected":false},"author":2,"featured_media":132401,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[28,112],"class_list":["post-132400","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/132400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=132400"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/132400\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/132401"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=132400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=132400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=132400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}