PaRT 1 RECENT ECONOMIC AND FINANCIAL DEVELOPMENTS Domestic Developments during the past few years is consistent wit The labor market strengthened further an overall picture of improving labor market during the second half of 2017 and early conditions. In line with this perspective, the LFPR for individuals aged 25 to 54-which is this year much less sensitive to population aging-has Payroll employment has continued to post been rising since 2015. The employment- solid gains, averaging 182,000 per month to-population ratio for individuals 16 and in the seven months starting in July 2017 older-that is, the share of people who are about the same pace as in the first half of working-was 60.1 percent in January and has 2017. Although net job creation last year was been increasing since 2011; this gain primarily slightly slower than in 2016, it has remained reflects the decline in the unemployment rate considerably faster than what is needed, on (The box""How Tight Is the Labor Market? verage. to absorb new entrants to the labor describes the available measures of labor force and is therefore consistent with the market slack in more detail.) view that the labor market has strengthened further(figure 1). The strength of the labor market is also evident in the decline in the continuing strong labor demand. The unemployment rate to 4. 1 percent in January, number of people filing initial claims for V4 percentage point below its level in June 2017 unemployment insurance has remained near and about percentage point below the its lowest level in decades. As reported in the median of Federal Open Market Committee Job Openings and Labor Turnover Survey, the (FOMC) participants' estimates of its longer rate of job openings remained elevated in the run normal level (figure 2 second half of 2017, while the rate of layoffs remained low. In addition, the rate of quits Other indicators also suggest that labor stayed high, an indication that workers are able market conditions have continued to tighten to obtain a new job when they seek one The labor force participation rate(LFPR) that is, the share of adults either working o actively looking for work-was 62.7 percent 3. Initial claims jumped in the fall of 2017 as a in January. The LFPR is little changed, on onsequence of disruptions from the hurricanes and then net, since early 2014 (figure 3). owever, the returned to a low level average age of the population is continuing to increase. In particular, the members of the 1. Net change in payroll employment baby-boom cohort increasingly are moving into their retirement years, a time when labor mp地 force participation typically is low. That development implies that a sustained period in which the demand for and supply of labor were in balance would be associated with a downward trend in the overall participation Total nonfarm rate. Accordingly, the flat profile of the LFPR 2. The hurricanes that struck the United States during the second half of last year caused substantial variation in the month-to-month pattern of job gains, but the L1111111」 average performance over the period 2009201020112012201320142015201620172018 probably substantially unaffected. SOURCE: Bureau of Labor Statistics via Haver Analytics.5 Domestic Developments The labor market strengthened further during the second half of 2017 and early this year Payroll employment has continued to post solid gains, averaging 182,000 per month in the seven months starting in July 2017, about the same pace as in the first half of 2017.2 Although net job creation last year was slightly slower than in 2016, it has remained considerably faster than what is needed, on average, to absorb new entrants to the labor force and is therefore consistent with the view that the labor market has strengthened further (figure 1). The strength of the labor market is also evident in the decline in the unemployment rate to 4.1 percent in January, ¼ percentage point below its level in June 2017 and about ½ percentage point below the median of Federal Open Market Committee (FOMC) participants’ estimates of its longer￾run normal level (figure 2). Other indicators also suggest that labor market conditions have continued to tighten. The labor force participation rate (LFPR)— that is, the share of adults either working or actively looking for work—was 62.7 percent in January. The LFPR is little changed, on net, since early 2014 (figure 3). However, the average age of the population is continuing to increase. In particular, the members of the baby-boom cohort increasingly are moving into their retirement years, a time when labor force participation typically is low. That development implies that a sustained period in which the demand for and supply of labor were in balance would be associated with a downward trend in the overall participation rate. Accordingly, the flat profile of the LFPR 2. The hurricanes that struck the United States during the second half of last year caused substantial variation in the month-to-month pattern of job gains, but the average performance over the period as a whole was probably substantially unaffected. during the past few years is consistent with an overall picture of improving labor market conditions. In line with this perspective, the LFPR for individuals aged 25 to 54—which is much less sensitive to population aging—has been rising since 2015. The employment￾to-population ratio for individuals 16 and older—that is, the share of people who are working—was 60.1 percent in January and has been increasing since 2011; this gain primarily reflects the decline in the unemployment rate. (The box “How Tight Is the Labor Market?” describes the available measures of labor market slack in more detail.) Other indicators are also consistent with continuing strong labor demand. The number of people filing initial claims for unemployment insurance has remained near its lowest level in decades.3 As reported in the Job Openings and Labor Turnover Survey, the rate of job openings remained elevated in the second half of 2017, while the rate of layoffs remained low. In addition, the rate of quits stayed high, an indication that workers are able to obtain a new job when they seek one. 3. Initial claims jumped in the fall of 2017 as a consequence of disruptions from the hurricanes and then returned to a low level. Total nonfarm 800 600 400 200 + _ 0 200 400 Thousands of jobs 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. Net change in payroll employment 3-month moving averages Private SOURCE: Bureau of Labor Statistics via Haver Analytics. Part 1 Recent Economic and Financial Developments