- Hector H. Sandoval, PhD, Bureau of Economic and Business Research and Department of Economics
The labor force participation rate (LFPR) accounts for the percentage of the population aged 16 years and older who is able to work in the economy, either employed or looking for a job and available for work.[i]
Prior to the 1960s, the labor force participation rate was around 57 percent in the U.S., without experiencing great variation. Between 1960 and 2000, the labor force increased markedly, as both the baby boom generation and more women entered the labor market. In 1971, the first baby boom cohort entered the prime working age (those aged 25 to 54); and the female labor force participation rate went from 45 to 60 percent between 1975 and 2000. In 2001 the labor force participation in the U.S. peaked at 67.1 percent, but dropped sharply since 2007, after the Great Recession. This recent decline is mainly explained by the aging of the population; the business cycle fluctuations, in particular, the long-term unemployment spells that the working population experienced during the last recession; and the lower participation of the younger population.[ii] Figure 1 depicts the historical trends of the total labor force participation rate for the U.S., as well as the rate for women and men. Women’s participation increased 11 percentage points, from 45.7 to 56.9, between 1970 and 2014, and peaked at 60 in 1999. Conversely, men’s participation declined steadily in the same period, from 78.7 to 69.2.
Over the past 40 years, the labor force participation rate in Florida has been around 4 percentage points lower than the U.S., following a similar historical pattern. However, there are certain distinctive features. Although there’s no data for years prior to 1976, Florida participation rate increased up to 1990, from 55.3 to 63.1. Between 1990 and 2005, the participation rate fluctuated around 62.5 percent, and peaked in 2007 at 63.8 percent, right before the Great Recession, contrary to U.S. Afterwards, the decline was slightly more severe than the U.S. Between 2007 and 2014 Florida’s participation rate went down by 3.5 percentage points, while U.S. rate dropped by 3.1. Figure 2 shows these trends between U.S. and Florida.
Figure 3 depicts the Florida labor force participation rate by gender between 2000 and 2014, the years for which data is available. On one hand, women’s participation stalled at 55 percent between these years. On the other, men’s participation decreased by 3.5 percentage points, such decline is more noticeable since 2007.
For the past 15 years, the growth rate of the labor force participation for those in the prime working-age cohort remained stable, with an average growth rate of 1.25. This age group experienced negative growth rates only for the years following a recession, because the labor force moves with the business cycle. Remarkably, the senior working population, those age 55 years and over, experienced a positive growth rate over the period. That is, every year since 2000, the labor force participation in this cohort increased around 3.6 percent. In 2001, the first cohort of the baby boomers reached the age of 55; since then and until 2011, this generation has disproportionally influenced the participation rates. However, a decline in their labor force participation is expected as the large baby boom cohort continue the transition into retirement. On the contrary, the labor force participation of the younger population, those between 16 and 24 years old, has showed lower growth rates, since younger workers are more likely to stay in school longer. The labor force participation for this segment decreased considerably during the Great Recession as a consequence of the long-term unemployment spells that marked this recession, which likely retained this population longer in school. Figure 4 displays the share of Florida’s labor force participation for seven different age groups, and Figure 5 displays the annual growth rates for three age groups, those aged 16 to 24, 25 to 54, and 55 and over.
The labor force will continue to decline as a consequence of the aging of the population, but also because the younger population tends to stay longer in school, as enrollment and graduation rates have increased over time. For Florida, the decline in the labor force participation is expected to be more pronounced as projections of median age for Florida indicate a continued upward trend.
[i] The Bureau of Labor Statistics (BLS) uses the term ‘civilian labor force’ to describe all persons 16 years of age and older residing in the 50 States and the District of Columbia, who are not inmates of institutions, such as penal and mental facilities, and who are not in the Armed Forces. The labor force participation rate accounts for the percentage of the civilian population that is in the labor force.
[ii] Aaronson, Daniel, Jonathan Davis, and Luojia Hu. "Explaining the decline in the US labor force participation rate." Chicago Fed Letter Mar (2012).
Braun, Steven, John Coglianese, Jason Furman, Betsey Stevenson, and Jim Stock. “Understanding the decline in the labour force participation rate in the United States.” Published on VOX, CEPR’s Policy Portal August (2014). Source URL: http://www.voxeu.org/article/decline-labour-force-participation-us