US – Labor Market Slack Persisted Federal Reserve Bank of Atlanta writes

Shifting labor force participation clouded unemployment picture

Although the labor force participation rate (LFPR) has trended down since early 2000 (when the LFPR was 67 percent), the recession exacerbated the decline (see the   Labor Force Participation Rate chart). At the end of 2014, roughly 62.7 percent of the working age population was either employed or actively seeking work, the lowest level since the 1970s.

A key issue for Fed policymakers is how much of the decline is tied to the weak economy—because people have given up looking for work or have stayed longer in school, for instance—and how much is due to longer-term structural trends.

Atlanta Fed research suggests that about half of the decline since 2007 is due to demographic changes, especially the aging population. Weak employment prospects have also played a role. As a result, improving labor market conditions may lure discouraged workers from the sidelines, in turn putting upward pressure on labor force participation.

That may be happening already. The LFPR decreased only 0.1 percentage point in 2014, the smallest 12-month decline in six years.

Chosen excerpts by Job Market Monitor. Read the whole story at  Labor Market Slack Persisted, But Just How Much? – 2014 Annual Report – Federal Reserve Bank of Atlanta.