A Closer Look

Labor Force Participation in US – Why Isn’t it recovering?

  • While the unemployment rate continues to fall quickly, labor force participation has made no progress since August 2020. In this US Daily, we examine where labor force participation remains weak and potential explanations for its underperformance.
  • Most of the 5.0mn persons who have exited the labor force since the start of the pandemic are over age 55 (3.4mn), largely reflecting early (1.5mn) and natural (1mn) retirements that likely won’t reverse. The outlook for prime-age persons who have exited the labor force (1.7mn) is more positive, since very few are discouraged and most still view their exits as temporary.
  • There are several reasons why workers have delayed labor force reentry. Childcare constraints and elevated fiscal transfers likely weighed on participation earlier in the pandemic but should have small effects going forward, and most households have only accumulated enough excess savings to postpone re-entry for a few months. Labor supply drags from Covid concerns appear sizeable and will likely linger in the medium-term, since it may take some time for some people to feel comfortable returning to work. We also see potential for longer-lasting drags due to wealth effects, and changing lifestyle and work preferences may prompt some workers to voluntarily remain out of the labor force for longer, provided they can afford to do so.
  • We continue to expect that the labor force participation rate will increase in the near-term, but we have nudged down our participation rate forecast to 1pp below trend at end-2021 (61.9%) and ½pp below trend at end-2022 (62.1%) following last Friday’s data. But because jobs are abundant and residual weakness in participation in mid-2022 will likely be due to changes in fiscal policy, wealth, and worker preferences, we expect that the FOMC will judge any participation shortfall that remains at that point to be structural or voluntary and will update their maximum employment goal accordingly.

Chosen excerpts by Job Market Monitor. Read the whole story @  Why Isn’t Labor Force Participation Recovering? (Briggs)


No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Jobs – Offres d’emploi – US & Canada (Eng. & Fr.)

The Most Popular Job Search Tools

Even More Objectives Statements to customize

Cover Letters – Tools, Tips and Free Cover Letter Templates for Microsoft Office

Follow Job Market Monitor on WordPress.com

Enter your email address to follow this blog and receive notifications of new posts by email.

Follow Job Market Monitor via Twitter



%d bloggers like this: