I completely agree. As I indicated, this piece of our forecast does make me nervous because we are far out of the consensus, especially in our expectation for the decline in labor force participation. I’m actually a little less nervous than I was a year and a half ago, when we first moved to this change in our forecast, because at the time a very big question was whether there was going to be a large pool of underutilized and unutilized workers who would come back into the labor force as the unemployment rate came down. When the unemployment rate came down, the labor force participation rate—pretty much as we had expected—moved sideways. So I feel a little more comfortable than I did earlier about this piece of our forecast. But any time you are this different from everybody else, you need to be reasonably humble.
As far as your observation about the market-based funds rate simulation, I think you are absolutely right. A different way to interpret it is to try to understand what the markets are telling us about the economy. I would also point to another alternative simulation that I think goes a bit in the direction that you’re suggesting—the “less inflation persistence” simulation, in which inflation comes down more rapidly and, in essence, allows the Fed to lower the fed funds rate more significantly than we’re assuming in the baseline in a way that’s not that different from the market’s expectation for the funds rate. Now, that’s one possibility, or it could be some combination. The market could be looking at some combination of a little less persistence of inflation and maybe a little weaker outlook for activity, although I would wonder about the weaker market interpretation. Looking at the full financial configuration, I don’t see indications from financial markets that there’s an expectation of a lot of financial stress on our doorstep. So I’m inclined to the view that they may be more in that “less inflation persistence” camp than in a “much weaker economy” camp.