Danske Research discuss the drivers and implications of the recent sharp decline in US labour force participation rate.

"The decline cannot be explained by any single driver alone, but we evaluate three possible explanations that could be in play simultaneously, 1) decline in net immigration, 2) loss of entry-level job opportunities and 3) early retirements. A sudden loss of labour supply that goes beyond the expected extent of the immigration slowdown is both a downside risk to real growth and an upside risk to inflation," Danske notes.

"We think the Fed will remain on hold in its upcoming September meeting, but eventually hike rates in December and March," Danske adds.