Last week the Bureau of Labor Statistics reported December total non-farm payrolls increased by a disappointing 74,000, yet the unemployment rate decreased to 6.7%, as the percent of adult Americans participating in the labor force declined to the lowest level since 1978. Volatility in the monthly non-farm data release is expected, especially during a colder-than-normal December, but the persistently low participation rate is perhaps a better indicator of the uneven economic recovery. A lower unemployment rate also creates communication issues for the FOMC, which had provided guidance that it may reduce monetary accommodation if the unemployment rate falls below 6.5%. SNWAM believes the Fed is unlikely to tighten monetary policy even when unemployment does fall below 6.5% if the participation rate remains as low as it is now. That being said, we expect the “tapering” of large-scale-asset-purchases (i.e., Quantitative Easing) to continue at approximately $10B per month until its completion at year-end. We continue to anticipate consumers and businesses spending and investing more and saving less, which will lead to gradual increases in growth and interest rates. Before we remove the “cautious” from our cautiously optimistic forecast for 2014, we would like to see an increasing participation rate as an indication of more robust economic growth.