US: Two Views of Declining Labor Force Participation
Ridgewood NJ, Here is an interesting economics view of the US labor force participation decline from head economist at Citi.
The interesting thing is that there are quite a few forces at work; older population, kids staying in school longer or going for higher degrees, women opting out, etc. Most important is the last point, the BLS projects it will continue to decline for another 10 years.
US: Two Views of Declining Labor Force Participation
1●It’s Temporary. Drop in labor force participation (LFPR) since 2007 reveals cyclical effect of unemployment previously masked by dominant demographics and too brief recessions.
–Downturn in LFPR associated with surge in long-term unemployed
–Correlation at state level between rising unemployment and falling LFPR.
–Large increase in discouraged workers, non-participants who want a job.
–Job-finding rates fell proportionately for recent and long-term jobless.
●Delayed response (increase) to falling unemployment implies that LFPR will rise strongly for several years after the economy reaches full employment.
2-●No, it’s Permanent. Major part of LFPR drop reflects mix of demographic, structural and other policy effects that may be only partially reversed over only a very long period.
–Population shifting to less-attached cohorts, including older, still prime-age workers.
–LFPR among prime-age women falling since 2000, high marginal tax rates at low incomes.
–Rising education enrollment.
–Accelerating trend in disabilities suggests more permanent hysteresis effect.
–Recent declines in discouraged workers and ‘not in labor force who want a job’
BLS projects that LFPR will decline another 1.5 percentage points by 2022.