The share of Americans in the workforce has declined sharply, but labor participation rates should begin bouncing back within a few years, according to federal officials. Learn more.
Labor participation rates declined sharply during the recession, but should begin bouncing back in a few years as the number of jobs reaches its pre-recession peak, according to an Economic Letter released today by the Federal Reserve Bank of San Francisco.
The U.S. economy has been expanding since the 2007 to 2009 downturn, but job growth has been weak and the labor market has recovered only 67 percent of the jobs lost during the recession, according to the San Francisco Fed. Three years into previous recoveries, employment had already exceeded its pre-recession peak.
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The labor force participation rate reflects the percentage of Americans ages 16 and older who are working or looking for work. The rate is affected by a range of social and economic factors, such as the feminist movement and the subsequent entry of women into the workforce, and the availability of government benefit programs. Rates tend to increase during times of economic expansion and dip during periods of recession, but the trend has intensified in the most recent recession.
An aging work force, increased use of disability insurance, the stabilization of women’s participation in the workforce and higher school enrollment among younger working-age Americans help explain the steep drop in labor participation during the most recent recession, according to the Fed. A significant cyclical factor includes the large-scale job loss that took place during the recession. As the economy continues to add jobs, labor participation rates should rise, as well.
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