Changing Labor Force Composition And The Natural Rate Of Unemployment

May 16th, 2015
in econ_news

from the Chicago Fed

Over the past 15 years, labor force participation (LFP) has steadily declined. While some of this decline is likely due to the weak economy, the bulk of it reflects demographics and other long-running trends. It is perhaps less well appreciated that the magnitude (and even the sign) of the change in the trend LFP rate differs significantly across demographic groups.

Follow up:

These divergent trend rates have changed the composition of the labor force in a manner that should lower the natural rate of unemployment. For example, the trend LFP rate has fallen especially rapidly for teens - a group that always has very high rates of unemployment. Likewise, the share of workers without any college education - another group with higher-than-average unemployment - has also fallen significantly over time.

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