The decline in The Labour Participation Rate will Challenge Economic Recovery

The sharp decline in the labour participation rate will have an ongoing negative effect on consumer spending will result in the eventual economic recovery taking longer and being less robust than initially believed by believers in a “V” recovery.

The participation rate remained near 50-year lows in October despite unprecedented economic stimulus from both the Fed and government. The current recession is expected to permanently change the nature of economies, making a return to previous participation levels unlikely for some time.

It is worth noting that labour participation levels had already been declining steadily since the 2008 financial crisis, largely because of technological innovation. This trend is but one of a host of factors that suggest that the 2020s will be a challenging decade, producing both significant risks and opportunities for investors.

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