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Can a hot but smaller labor market keep making gains in participation?

Employment Situation Report, we take stock of the size and composition of the labor force to identify both populations and policies that could contribute to gains in labor force participation. Such gains would increase labor market income and would help the economy grow without creating more inflationary pressure.To get more news about 中文字幕在线人成视频, you can visit our official website.

As of June 2022, the size of the labor force has shrunk relative to its pre-pandemic path: the labor force is roughly three- to three-and-a-half million workers smaller than its pre-pandemic projection.[1] A large portion of the decrease in the size of the labor force relative to pre-pandemic projections—approximately a third—has nothing to do with labor force participation. First, the population is smaller because of pandemic-related deaths. While those deaths have been concentrated among those 65 and older (three-quarters of a million), more than a quarter of a million pandemic-related deaths are estimated for those between the ages of 18 and 64. Second, there are ongoing pandemic- and policy-related factors that are depressing immigration.
The biggest decline in the labor force has been among those ages 55 and over, with those 65 and older accounting for about a third of the total decline, owing to a combination of death among this group and lower labor force participation. The declines in participation likely reflect early retirements, concerns about health, and to some extent excess disability and lower life expectancy caused by disability due to COVID-19.

The aggregate labor force participation rate (the share of the population over the age of 16 who is working or actively seeking work) remains depressed at 62.2 percent. This piece documents changes in labor force participation between June 2022 and two earlier periods: 2016 (when LFPR began to pick up after a sustained decline) and 2000 (when LFPR peaked). By controlling for the contribution of changing demographics to LFPR, we isolate the contribution of participation to the differences in LFPR from June 2022 to 2016 and 2000. This analysis explores the opportunities that a smaller but hotter labor market afford, identifies populations who could drive labor force growth, and points to public policy interventions that could increase labor force participation.
Figure 1 shows monthly and annualized labor force participation rates from the late 1970s to today. As of June 2022, LFPR is 0.9 percentage points below its 2019 average rate.[2] It is also 0.6 percentage points below its 2016 rate—the year the rate began its three-year rebound after 15 years of decline. And, compared to its 2000 peak, LFPR is down 4.9 percentage points; LFPR’s peak in 2000 reflected rising labor force entry among women, whose participation rate grew by more than 20 percentage points between the early 1960s and the turn of the century.
The overall decline in LFPR from the early 2000s has largely reflected the aging of the population and the movement away from work for young adults in school, which more than offset the increase in LFPR from increases in educational attainment (both high school and postsecondary) and from older workers staying in the labor market longer. Labor force participation has also been influenced by the business cycle, declining in the aftermath of the Great Recession and the COVID-19 recession and then recovering as conditions improved. Aaronson et al. find that structural factors (such as aging, the trajectory of participation among certain demographic groups, and disability insurance takeup) could explain almost all of the decline in LFPR between 2007 and 2014.
Although demographics explained most of the decline in LFPR from 2000 to 2009, other factors pushing down LFPR became increasingly apparent and important after the Great Recession through 2016. Indeed, at the time, policymakers, economists, and other observers had significant concerns that LFPR was continuing to decline even as other parts of the economy recovered. Then, from 2016 through just before the pandemic, LFPR rose even as demographics, on net, pushed it down. That experience offers evidence that factors can indeed push up labor force participation within demographic groups.
While on net LFPR as of June 2022 is still below its 2016 rate, some groups are participating at higher rates while others at lower rates. From 2016 to June 2022, women made the greatest positive contribution to the overall labor force participation rate, netting an increase of 0.4 percentage points, compared to men at 0.1 percentage point. Prime-age (25- to 54-year-old) women increased aggregate LFPR by 0.1 percentage points while prime-age men reduced it by 0.1 percentage points. Among prime-age men, the biggest decline came from men without a bachelor’s degree. The decline for women between 45 and 54 with less than a bachelor’s degree was also sizable.