This paper demonstrates that, because of declining labor force participation rates, the usual estimates of job creation needed to keep unemployment in check are too high. It is estimated that only 98,000 jobs (rather than the usual goal of 150,000 jobs) need to be created per month to absorb the growing labor force. As the population ages, the labor force will grow even more slowly, and the number of jobs that need to be created will decline. This paper explores the potential implication of this decline in labor force growth on total output along with potential sources of replacement labor to fuel desired growth in the gross domestic product (GDP).
JEL classification: J21, E24
Key words: job growth, labor force participation, unemployment
The author thanks Robert Moore and John Robertson for comments and suggestions. The views expressed here are the author’s and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author’s responsibility.
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