Federal Reserve Chair Jerome Powell said the shortfall in labor force participation in the U.S. relative to its pre-pandemic trend is mostly due to excess retirements, which can’t be expected to reverse anytime soon, Bloomberg News reported. “Some of the participation gap reflects workers who are still out of the labor force because they are sick with COVID-19 or continue to suffer lingering symptoms from previous COVID infections,” Powell said yesterday. “But recent research by Fed economists finds that the participation gap is now mostly due to excess retirements — that is, retirements in excess of what would have been expected from population aging alone,” he said. “These excess retirements might now account for more than 2 million of the 3 1/2 million shortfall in the labor force.” The combination of lower net immigration and a surge in deaths during the pandemic probably together account for about 1.5 million missing workers, Powell said. Fed officials have been raising interest rates quickly this year in a bid to bring inflation down from four-decade highs. The central bank’s benchmark federal funds rate is now just below 4%, and investors generally expect it to peak around 5% sometime next year, according to futures contracts.
