Last month, for the first time I could recall, Ben Bernanke, the Chairman of the U.S. Federal Reserve, claimed that he was concerned about the U.S. Labor Force Participation Rate (See chart above).
This morning it was reported that the Participation Rate fell again in October to 62.8% from 63.2% in September. The last time it was this low was 1978.
The Participation Rate is defined as the employed percentage of the total number of people who are able to work. Social benefits are a major contributor to this statistic, especially in times when it is more difficult to get a job.
The challenge for Ben Bernanke, Janet Yellen (the presumptive future chairman), and the Federal Reserve is to find new ways to improve the Participation Rate if they truly consider it to be important. This is because their current policy of Quantitative Easing-related money-printing has not done a thing. All the way through the QE era, the trend in Labor Participation has been down. So much for $3 trillion in monetary expansion.
If anything, this will cause the Federal Reserve to delay the start of the Tapering of the current round of Quantitative Easting (QE3) and/or slow the pace of Tapering once it does start. This will create some foundation under stock prices and help to limit sudden drops in the bond market (even though the 32-year secular bull market in bonds ended in July 2012).
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