A new Federal Reserve study, to be published in July, finds that the retirement of the Baby Boom generation will force far-reaching adjustments in the way the economy works. Preliminary results of "The Recent Decline in Labor Force Participation and its Implications for Potential Labor Supply" from The Brooking Institution suggest that forecasts for everything from growth and employment to corporate profits and interest rates will have to be recast.
According to a report on the preliminary results from Bloomberg, the study has shaken economists' forecasts by suggesting the U.S. economy will have to decelerate much more over the next decade than most now expect. "The study projects what the authors call a 'conservative' 3 percentage-point decline over the next 10 years in the labor force participation rate--the percentage of people who are either working or looking for work." However, other economic forecasts predict much smaller drops in the participation rate.
Source: "`Revolutionary' Fed Study Has Economists Rethinking Forecasts" Bloomberg.com (April 13, 2006)