. government policies could also be designed to make work more attractive to other demographic groups. finally, to a limited extent, immigration has the potential to alter the future pace of labor force growth. most directly, if future immigration rates exceed those assumed by the census bureau, the population, and hence the labor force, would grow faster than the census bureau currently projects. in addition, because new immigrants tend to be younger and are more likely to participate in the labor force than are native - born individuals, higher immigration would also lead to a higher overall participation rate. some of the influences described above may already be boosting the participation rate relative to the model ’ s prediction. as shown in exhibit 6, the labor force participation rate of individuals aged 62 and older had been trending down since the late 1970s but has been rising markedly since 1995. to some extent, this increase simply reflects the aging of a generation of women who were more likely to be in the labor force throughout their lifetimes than were earlier generations of women. however, the magnitude of the rise is greater than can be explained by this factor alone. because the factors just discussed have the potential to offset some of the effects of population aging, and given the considerable uncertainty that surrounds any long - term economic projection, economists hold a range of views about the pace of future labor force growth. a projection from the congressional budget office is shown in exhibit 7. the cbo foresees the pace of trend labor force growth slowing to 1 / 2 percent per year by 2015, a smaller deceleration than projected by the model developed by board staff but still a significant slowing. as i indicated at the outset, the aging of the population has important implications for the living standards of current and future generations. because total output is equal to output per worker times the number of workers, a slowdown in the rate of labor force growth will, all else equal, tend to slow the growth of output – as shown in the right - most column of exhibit 7. moreover, if the growth in the labor force is lower than population growth, output per person will, all else equal, rise even more slowly than output per worker. indeed, as indicated in the exhibit, both the federal reserve staff projection and the cbo projection for the growth of the labor force through 2015 are lower than the growth of the population expected in that period by the census bureau. consequently, on these projections, the level of output per person will be lower than it would have been without

##cture, so this is a good time to take stock of where we are and to peer ahead through the prognosticator's always murky lens. i must emphasize that these views are my own and do not necessarily reflect those of my colleagues on the federal open market committee. 1 on balance, the economy has been performing quite well in recent quarters, with growth strong and underlying inflation stable despite the considerable rise in energy prices over the past few years. i say " on balance " because a number of unusual factors have been influencing the pattern of economic activity lately, adding to the normal difficulty of discerning underlying trends from inherently volatile data and other information. these factors include not only last year's devastating hurricanes but also the unusually warm weather in the early part of this year, which very likely provided a fillip to housing construction and consumer spending. smoothing through these events, however, the economy has been expanding at a pretty good clip by historical standards - - probably an annual rate of about 3 - 1 / 2 percent since midyear 2005. several factors have propelled reasonably strong economic growth. a critical element has been supportive financial conditions. despite the tightening of monetary policy that began in mid - 2004, short - term interest rates were at fairly low levels until recently, and the effects of those low rates have continued to spur household and business spending. in addition, although longer - term yields have moved up notably in recent weeks, they too have been low by historical standards. moreover, credit to businesses and households has remained readily available at narrow spreads in markets and on favorable terms and conditions at banks, reflecting, in part, robust earnings and strong balance sheets at businesses along with good performance on outstanding household and business loans. wendy dunn and lawrence slifman, of the board's staff, provided valuable assistance in the preparation of these remarks. the pace of economic growth in the united states has also been supported by a firming of activity abroad and the associated increases in demand for our exports. among industrial countries, expansion of output has become more firmly established in both japan and the euro area, while growth continues at a solid pace in the united kingdom and canada. furthermore, economic growth in most of the emerging economies of asia has been robust. u. s. exports were disrupted by last summer's hurricanes in the gulf, but smoothing through this volatility, exports appear to have been contributing substantially to the growth of gross domestic product ( gdp ). our economy has been able to register