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posted on 29 May 2016

Why Is The Labor Force Participation Rate Increasing?

from the St Louis Fed

-- this post authored by Ana Maria Santacreu and Usa Kerdnunvong

The unemployment rate in the United States has been declining since the Great Recession ended in mid-2009. [1] This decline has been partly due to discouraged workers leaving the labor force, as illustrated by the decrease in the labor force participation rate in the figure below. [2]

Unemployment Rate and Labor Force Participation

However, the labor force participation rate has started to increase after trending downward since the end of the recession. It rose from 62.4 percent in September to 63 percent in March before settling at 62.8 percent in April. During this period, the unemployment rate continued decreasing, reaching 5 percent in April.

A closer look at the labor force participation rate is important to understand what is behind this trend. To do that, we decomposed labor force participation by gender, age and education levels for the period beginning in September.

Labor Force Participation Gender

Labor Force Participation by Age

LFPbyEducation

Several patterns emerged from these figures. First, we observed that the increase in female participation led to the increase in the labor force participation rate before November. However, the male participation rate has been increasing at a faster pace since then.

Second, the labor force participation rate has risen across all age categories:

  • 54.5 percent to 55.2 percent for ages 16-24

  • 80.6 percent to 81.2 percent for ages 25-54

  • 39.7 percent to 40.1 percent for ages 55 and above

The most interesting patterns arose when we looked at labor force participation by levels of education. We observed that the lowest education group increased its participation rate the most, from 44.8 percent to 46.1 percent. The highest education group, however, saw an overall slight decrease in its participation rate. For other education groups, there was not a clear trend.

Based on the above decompositions, we concluded that the recent increase in the labor force participation that we observed has been mainly driven by males and the lowest education workers.

Notes and References

[1] The unemployment rate is the fraction of the labor force that is unemployed (jobless, actively searching for a job and available to take one). The labor force is comprised of employed and unemployed people in the working age population.

2 The labor force participation rate is the fraction of the total working age population that is in the labor force.

Additional Resources

Disclaimer

Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

Source

https://www.stlouisfed.org/on-the-economy/2016/may/why-is-labor-force-participation-rate-increasing

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