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Philadelphia, PA — New economic policies are needed to combat the nation’s persistently declining labor force participation rate, Federal Reserve Bank of Philadelphia President Patrick T. Harker said today. “The U.S. labor market is strong, but participation is waning,” Harker said in his speech to the World Affairs Council of Philadelphia.

Harker highlighted a number of factors contributing to this trend in the participation rate, including the first wave of baby boomers beginning to retire, the increase in life expectancy, and the rising number of high school graduates. “After accounting for all those factors, the lower rate of labor force participation is understandable. And in the case of people living longer and enjoying their retirement, or more people able to make choices that fit their life preferences, it’s a positive.”

Harker noted, though, that the decline in the labor force participation rate and its suppressive effect on productivity, growth, and the natural rate of interest poses “important challenges for monetary policy” because it gives the central bank “less room to maneuver.”

“Given our demographic realities, this puts even more pressure on fiscal and other policies to take a long-term look at policies that can nurture growth,” Harker said. He proposed immigration as one source of potential for stimulating the participation rate and growth overall.