Who Is Driving the Decline in the Labor Force Participation Rate?
The employment data released last Friday by the Bureau of Labor Statistics show that the unemployment rate has fallen by 0.4 percentage point, to 9.0 percent. However, there was little or no change to the labor force participation rate, which is at its lowest level since the mid-1980s. The fraction of the population that is counted as not being in the labor force has now risen to a level higher than at any time since 1990. (Those counted include the fraction of the U.S. population that is 16 years old or older, not on active duty in the Armed Forces, not living in an institution such as a nursing home or prison, and not employed or currently looking for work.)
Has one demographic group been driving the increase in the number of workers leaving the workforce, or does the increase just reflect a broad-based departure of all demographic groups? Both factors seem to be responsible to some degree, depending on how you slice the data. Differences show up in the behavior of men and women and across age groups, while different racial groups are experiencing similar changes to their levels of labor force participation.
The fraction of women who were out of the labor force declined through the 1990s, then rose a bit during the early 2000s, and held steady until 2009. However, the fraction has been rising in the past two years. Meanwhile, the fraction of men who are not in the labor force has been rising steadily since 1990, and this rise has accelerated since 2007.
Comparing the fractions for men and women over time confirms that the fraction of men not in the labor force rose more than the fraction of women not in the labor force from December 2007 to December 2010. In contrast, the fractions of white, black, Hispanic, and Asian workers who are not in the labor force all seem to have increased by about the same amount over the period.
Finally, some interesting patterns emerge across different age groups. The patterns are broadly similar across gender and race categories, with some small differences across race. Looking at changes in the age distributions of white men who are not in the labor force reveals that for each age group up to 64,the fraction has increased since December of 2007. The largest increases are for white men aged 29 and under. The only group that saw a drop in the fraction that is not in the labor force is white men aged 65 and older.
The pattern for young black men is somewhat similar to that for young white men—the fraction of those not in the labor force has increased. However, labor force participation increased across all age groups of black men aged 50 and above between December 2007 and December 2010.
Similar comparisons for black women and white women reveal decreases in labor force participation among young women and no systematic change in labor force participation among older women.
In summary, the lowest U.S. labor participation rate since the mid-1980s is being driven by lower participation across all demographic groups, and especially by those under 29. The biggest exception is older men, whose labor force participation rate has actually increased since the beginning of the recession.