Fed's Kaplan sees participation under 61% in 2024
One of the most irritating episodes of the Federal Reserve's dismal forecasting record is labor force participation.
They have repeatedly said the fall in labor force participation since the crisis was 'expected'. The thing is, that reeks of moving the goalposts. Despite the enormous staff at the Fed, they didn't formally forecast something as critical as the number of Americans expected to be working.
Given that unemployment is half of their dual mandate, that's remarkable. You really can't separate unemployment from the participation rate and (arguably) participation is more critical that unemployment, and if it's based on demographics it should be simple to estimate.
To underscore the point, in a handful of papers, Fed researchers did attempt to forecast it and the numbers were much higher than where we are now.
By forecasting participation (albeit vaguely) at least Kaplan is firmly planting the goal posts.
For more on the participation rate, see: Why the Canadian jobs market is much healthier than the US and why the Fed is wrong.
