Federal Reserve Chairman Jerome Powell warned on Wednesday that there are two major long-term issues that could pose a threat to the U.S. economy: Sluggish productivity growth and low job participation.
Powell said the U.S. falls behind most developed countries in terms of the percentage of workers in prime working ages who are in the labor force. In October, labor force participation ticked up slightly to 63.3 percent, compared to 63.2 percent in September.
"We lag just about every wealthy country in the world in labor force participation and that is not where we should be," Powell said Wednesday during testimony before the congressional Joint Economic Committee. “And I think there are many things we could do about it.”
Among the “many things” that could be done to address the problem are funding programs to address the opioid crisis, providing increased training for skills and offering internships. He also noted that immigration accounts for a large chunk of total labor growth.
In the U.S., the total labor force is expanding at a rate of roughly 0.5 percent, compared to about 2.5 percent in the 1960s, he said. About half of that is immigration.
“So, immigration is a key input into our longer-term growth rate,” he said. “I would say if you look to population growth as a way to support higher growth in the United States, then immigration would need to be in your thinking.”
However, he noted those types of policies fall under the federal government’s purview — not the Federal Reserve.
“The Fed can't do much about it,” he said. “So it's more about fiscal policy.”