to prevent low growth, low inflation, and low interest rates from becoming the new normal? we need to focus on ways to increase our long - term growth and spread that prosperity as broadly as possible. i hasten to add that these policies are, for the most part, outside the purview of the federal reserve. we need policies that support productivity growth, business hiring and investment, labor force participation, and the development of skills. we need effective fiscal and regulatory policies that inspire public confidence. increased spending on public infrastructure may raise private - - 10 sector productivity over time, particularly with the growth of the stock of public infrastructure near an all - time low. 7 greater support for public and private research and development, and policies that improve product and labor market dynamism may also be fruitful. 8 monetary policy can contribute by supporting a strong and durable expansion in a context of price stability. monetary policy the low interest rate environment presents special challenges for monetary policy. in setting our target for the federal funds rate, a good place to start is to identify the rate that would prevail if the economy were at 2 percent inflation and full employment - - the so - called neutral rate. “ neutral ” in this context means that the rate is neither contractionary nor expansionary. if the fed funds rate is lower than the neutral rate, then policy is stimulative or accommodative, which will tend to raise growth and inflation. if the fed funds rate is higher than the neutral rate, then policy is tight and will tend to slow growth and reduce inflation. but we can only estimate the neutral rate, and those estimates are subject to substantial uncertainty. before the crisis, the long - run neutral rate was generally thought to be roughly stable at around 4. 25 percent. since the crisis, estimates have steadily see, for example, abdul abiad, davide furceri, and petia topalova ( 2014 ), “ imf survey : the time is right for an infrastructure push, ” world economic outlook ( washington : international monetary fund, october ), www. imf. org / en / news / articles / 2015 / 09 / 28 / 04 / 53 / sores093014a. see, for example, international monetary fund ( 2016 ), “ acting now, acting together, ” fiscal monitor ( washington : imf, april ), www. imf. org / external / pubs / ft / fm / 2016 / 01

men in the heart of their working - age years. going forward, many analysts expect labor force participation to decline at a trend rate of roughly 0. 3 percent per year as a result of these factors. however, participation fell much more sharply than that after the financial crisis. some of those who left the labor force went back to school, but others moved onto disability, took early retirement, or just became discouraged and stopped seeking work. the sharp drop raised fears that the crisis might leave behind permanent damage to our labor force. fortunately, since late 2013, the participation rate has remained about flat and thus has gradually moved back close to its estimated longer - term trend. 2 on net, people have been entering and remaining in the labor market as job prospects have brightened, offsetting the natural decline from population aging. the current participation rate is within the range of estimates cited in stephanie aaronson, tomaz cajner, bruce fallick, felix galbis - reig, christopher smith, and william wascher ( 2014 ), “ labor force participation : recent developments and future prospects, ” brookings papers on economic activity, fall, pp. 197 - 275, www. brookings. edu / wp - content / uploads / 2016 / 07 / fall2014bpea _ aaronson _ et _ al. pdf. - 4surveys of households and firms also suggest that we are near full employment ( figure 5 ). for example, respondents are now more likely to say that jobs are plentiful than that they are hard to get - - a response that has generally been seen when the economy is near full employment. job vacancies are running at high levels, and firms report that it is getting harder to find employees to fill open positions. moreover, wages are now rising faster than inflation, and faster than output per hour. taken together, labor market indicators show an economy that is on solid footing and close to our mandate of maximum employment. it is interesting to compare this expansion to past u. s. expansions, and also to recoveries of other countries since the end of the global financial crisis. the picture is a mixed one. the current recovery has been under way since june 2009 - - nearly seven and a half years. it will soon be the third longest of the 20 recoveries since the founding of the federal reserve in 1913. gdp, or output, is now 11 percent higher than its pre - crisis peak. employment is now 6