BPEA | Spring 2006

The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply

Andrew Figura,
Andrew Figura Economist - Board of Governors of the Federal Reserve System
Bruce Fallick,
Fallick headshot
Bruce Fallick Senior Vice President - Research Department, Federal Reserve Bank of Cleveland
Jonathan Pingle,
Jonathan Pingle headshot
Jonathan Pingle Managing Director and Chief U.S. Economist - UBS
Stephanie Aaronson, and
Stephanie Aaronson Headshot
Stephanie Aaronson Senior Associate Director, Division of Research and Statistics - Federal Reserve Board
William Wascher
Wascher headshot
William Wascher Deputy Director of the Division of Research and Statistics - Federal Reserve Board of Governors

Spring 2006

THE LABOR FORCE PARTICIPATION rate is defined as the percentage of the
noninstitutional working-age population (those aged 16 and over) reporting
themselves as either working or actively looking for work. This statistic
is constructed from data collected as part of the Current Population
Survey and published monthly by the Bureau of Labor Statistics (BLS).
Its longer-run trend is an important determinant of the supply of workers
to the U.S. economy. For much of the past four decades, the participation
rate has trended upward, rising from less than 60 percent in the early 1960s to
more than 67 percent by the late 1990s. However, after peaking at 67.3 percent
in the first quarter of 2000, the participation rate fell steadily to under
66 percent by early 2005 and has edged up only to just above 66 percent
since then.

FILE PHOTO -- A man rubs his eyes as he waits in a line of jobseekers, to attend the Dr. Martin Luther King Jr. career fair held by the New York State department of Labor in New York April 12, 2012. REUTERS/Lucas Jackson/File Photo - RTX2NWJ6