Philly Fed: Causes of Decline in Labor Participation

May 5th, 2014
in econ_news, syndication

Econintersect:  The labor participation rate (percentage of working age Americans in the labor force) peaked around 2000.  The decline accelerated after the Great Recession.  From he peak in 2000 to the official end of the Great Recession (June 2009) the participation rate dropped from 67.2% to 65.8%, approximately o.2% per year.  Since the end of the recession the decline has steepened, taking the rate down to 62.9% by the end of 2013, a drop approximately 0.6% per year.

Click on graph for larger image.

Follow up:

An analysis of this phenomenon has been carried out by Shigeru Fujita, Federal Reserve Bank of Philadelphia.  Fujita's analysis concludes that there may have been an underlying cyclical pattern to the decline in the labor force since 2000, but since the summer of 2009 the sharp rise in the contributions from retirements accounts for the dramatic increased rate of decline in the labor force participation rate.  He says this is "clearly affected by cyclical factors, but this decision is unlikely to be reversed."


Click on page image below to read the complete paper.



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