Page 9 - ISO April 2023
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                  Total US Visas Issued
                    During Fiscal Year                      are almost impossible for policymakers to affect, the immigra-
                                                            tion issue is one of those partial solutions that could help
                                                            increase the labour force participation rate and is in the pur-
                                                            view of the political establishment to achieve.

       6,000,000                                                 KEY TAKEAWAYS:
                                                                 •  Labour force participation refers to the percentage of
                                                                   the population who are either employed or actively
       2,000,000                                                   seeking employment. Overall, labour force partici-
                                                                   pation has declined in the US over the past several
             0                                                     decades.
               2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  2022
                                                                 •  The  COVID-19  pandemic  caused  a significant drop in
       Source: FactSet, as of 19/3/2023
                                                                   labour force participation, we are still 0.8% lower than
        former employees as the economy reopens, as many of their   what it was pre-pandemic, so where did all these people
        former employees are reluctant to return to their old jobs.”  The   go?
        research points out that these factors will probably fade out in the
        future but that this is not guaranteed.                  •  Most of these missing workers are likely a combina-
                                                                   tion of early retirees, individuals who passed away
        The Fed has allowed the rate of inflation to overshoot its 2%   from COVID-19, those with long COVID, a reduced
        target for two years and now need to push this ‘over the   number of immigrant visas, and those who worked
        longer-run’ average down as fast as possible. In fact, as we   from home during the during the pandemic and don’t
        have said before, the Fed will probably have to undershoot the   want to return to the office.
        2.0% target on inflation for several years in order to achieve its   •  The question of whether there is more or less slack
        2.0% target ‘over the longer run.’ Thus, one of the factors   in the US labour market is one of the most con-
        potentially  threatening  this  strategy  is  the  strong  US  labour   sequential questions for monetary policy going
        market. For this reason, we expect the Fed’s stance to remain   forward, as it will determine how high and for how
        hawkish for longer, rather than return to a more accommoda-  long the Fed is expected to remain hawkish/dovish
        tive stance in the short to medium term. Although many of the   on the inflation front.
        reasons for individuals not coming back into the labour force

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