PaRT 1 RECENT ECONOMIC AND FINANCIAL DEVELOPMENTS Domestic Developments The labor market strengthened further during the second half of 2018 and early 1. Net change in payroll employment this year∴ Monthly Thousands of jobs Payroll employment gains have remained strong, averaging 224,000 per month since June 2018 (figure 1). This pace is similar to the W pace in the first half of last year, and it is faster than the average pace of job gains in 2016 and 2017 Total nonfarm The strong pace of job gains over this period has primarily been manifest in a rising labor force participation rate (LFPR)the share of the population that is either working or actively looking for work-rather than The data are 3-month moving averages. a declining unemployment rate. Since Bureau of Labor Statistics via Haver Analytics. June 2018, the LFPr has moved up about V4 percentage point and was 63.2 percent in January-a bit higher than the narrow range it bor force participation rates and employme has maintained in recent years(figure 2). The mprovement is especially notable because the aging of the population-and, in particular, the movement of members of the baby- ^ boom cohort into their retirement years-has otherwise imparted a downward influence on the LFPR. Indeed the lFPr for individuals between 25 and 54 years old-which is much less sensitive to population aging-has Employntenl-to-population rat 1. The observed pace of payroll job gains would have been sufficient to push the unemployment rate lower had L⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥⊥」 the lFPr not risen. Indeed, monthly payroll gains in the range of 115,000 to 145,000 appear consistent with NoTE: The data an unchanged unemployment rate around 4.0 percent and an unchanged LFPR around 62.9 percent(which rate and the employment-to-population ratio are percentages of the population are the june 2018 values of these rates ). If instead SoURCE: Bureau of Labor Statistics via Haver Analytics. the lFPr were declining 0. 2 percentage point per year--roughly the influence of population aging-the range of job gains needed to maintain an unchange unemployment rate would be about 40,000 per month lower. There is considerable uncertainty around these estimates, as the difference between monthly payroll gains nd employment changes from the Current Population Survey(the source of the unemployment rate and LFPr can be quite volatile over short periods.5 Domestic Developments The labor market strengthened further during the second half of 2018 and early this year . . . Payroll employment gains have remained strong, averaging 224,000 per month since June 2018 (figure 1). This pace is similar to the pace in the first half of last year, and it is faster than the average pace of job gains in 2016 and 2017. The strong pace of job gains over this period has primarily been manifest in a rising labor force participation rate (LFPR)—the share of the population that is either working or actively looking for work—rather than a declining unemployment rate.1 Since June 2018, the LFPR has moved up about ¼ percentage point and was 63.2 percent in January—a bit higher than the narrow range it has maintained in recent years (figure 2). The improvement is especially notable because the aging of the population—and, in particular, the movement of members of the baby￾boom cohort into their retirement years—has otherwise imparted a downward influence on the LFPR. Indeed, the LFPR for individuals between 25 and 54 years old—which is much less sensitive to population aging—has 1. The observed pace of payroll job gains would have been sufficient to push the unemployment rate lower had the LFPR not risen. Indeed, monthly payroll gains in the range of 115,000 to 145,000 appear consistent with an unchanged unemployment rate around 4.0 percent and an unchanged LFPR around 62.9 percent (which are the June 2018 values of these rates). If instead the LFPR were declining 0.2 percentage point per year—roughly the influence of population aging—the range of job gains needed to maintain an unchanged unemployment rate would be about 40,000 per month lower. There is considerable uncertainty around these estimates, as the difference between monthly payroll gains and employment changes from the Current Population Survey (the source of the unemployment rate and LFPR) can be quite volatile over short periods. Part 1 reCent eConomiC and finanCiaL deveLoPments