Submission statement per the Federal Reserve: Labor force growth has been slowing and could be near-zero starting this year, driven by weak population growth reflecting low net immigration and by declining labor force participation reflecting population aging. Such weak growth in the labor force is unprecedented in the United States’ recent history.
[ Conclusion Quote – ]
…two significant implications of near-zero labor force growth: (i) Breakeven employment growth would also be near-zero—such that, if the unemployment rate is relatively constant, then negative job growth would be almost as likely as positive job growth in any given month. (ii) Any growth in potential GDP will need to come entirely from labor productivity growth.
Posted by Adminisnotadmin
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The negative drag on growth being present from a stagnant population, we are going to have to rely more on productivity growth to keep the economy afloat.
The problem with this is that we have supply-side structural issues not just in labor now, but also in energy with the recent oil shock from the Iran War (20% of global oil is currently missing).
Combined with the general rule of thumb that $10 rise in oil is equivalent to [0.4 percentage point increase in inflation](https://www.schwab.com/learn/story/oil-inflation-from-gas-to-groceries), and the inability to “Volker the rates” (raising the Federal Funds rates high enough to cause recession), we are staring down a stagflationary impact that the Fed may not be able to ameliorate without fiscal or policy changes.
Edit: Headline inflation is currently running around 2.43%. Oil going from $60 to $110 (a $50 change) means that is likely to head around 5% soon.