Several reports out this week conclude that more and more Americans are just plain exiting the workforce, though the headlines tell a different story: The number of people filing for unemployment fell today to the lowest level since 1973–which sounds awesome. Yesterday I read that one institution forecast that the unemployment rate will fall to 4.1% by 2017–double awesome. So it sounds like everyone who wants to work should be able to find a job. The reality seems to be that these numbers are declining as a result of an increasing number of workers who are calling it quits. Underemployment and government subsidies are making a day filled with Dr. Phil and Guiding Light more appealing than clocking into the daily grind. The following graph of the Labor Force Participation Rate from the Department of Labor shows that the percentage of employed Americans is continuing to decline to new all-time lows.
What that means for the future of interest rates is uncertain; the market is a fickle thing. A declining workforce should keep interest rates near these record low numbers, but lower productivity creates a world of other challenges.