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(N1) Probes $70.00

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GDP Contracts 2.3% YoY In Q1

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In a note last week, BofA concluded that it could take a long time for the labor force participation rate to return to pre-COVID levels (see 1412ET bullet).

  • Of the ~4.6mn workers not in the labor force "due to the pandemic" (which are in addition to the 9.7mn officially reported unemployed), about half "could come back easily" (when unemp insurance runs out / children return to school), but many may be out of the workforce much longer, incl 700K workers who left "due to skills mismatch" and 1.2m aged 65+ who retired. And that doesn't count the estimated 140K which "have sadly been lost due to Covid deaths".
  • "Over the next several years, the recent surge in retirements and long run demographic trends are likely to weigh on the participation rate, making it difficult for the labor force participation rate to return to pre-pandemic levels."
  • The flipside of that though is "there is notable risk for a quicker drop in the unemployment rate than our current forecast (4.2% YE2021, 3.5% YE2022). Tighter labor market conditions should provide greater support for better trend wage growth in coming quarters."


BofA, citing BLS CPS