It will be a challenge for regulators and governments to resist demands for relaxation of the new capital requirements, both the enhanced minimum levels and the capital buffers proposed in good times. The lobbying power of the financial industry will be restored by that time and hence authorities will need to be prepared for such challenges.
Some are skeptical, though, because the decline in the unemployment rate reflects not only increases in employment but declines in labor force participation. Many interpret such declines in the participation rate as representing discouraged workers who have stopped looking for work. Yet, labor force participation rates can also decline for demographic reasons.