Labor Force Participation Rate

What Is the Labor Force Participation Rate?

The labor force participation rate is an estimate of an economy's active workforce. The formula is the number of individuals ages 16 and more seasoned who are employed or actively seeking employment, separated by the total non-regulated, civilian working-age population.

In the 12 months ending May 2022, the U.S. labor force participation rate ran between a low of 61.6% and a high of 62.4% (which was the figure for March 2022), as per the U.S. Bureau of Labor Statistics, which distributes the figures month to month. The labor force participation rate was 62.3% for May 2022.

From 2013 on, the month to month figures held consistent nearby 63%, after a sharp decline in the wake of the Great Recession. Be that as it may, in mid 2020, the labor force participation rate fell particularly, dropping from 63.4% to 61.4% in the main half of the year, because of the COVID-19 pandemic. Its low point was arrived at in April 2020, when the rate sank to 60.2%.

Understanding the Labor Force Participation Rate

The labor force participation rate is an important measurement to utilize while breaking down employment and unemployment data since it measures the number of individuals who are actively work hunting as well as the people who are presently employed. It omits regulated individuals (in detainment facilities, nursing homes, or mental clinics) and individuals from the military.

It incorporates any remaining individuals age 16 or more seasoned and compares the extent of the people who are working or seeking work outside the home to the individuals who are neither working nor seeking work outside the home.

Since it accounts for individuals who have given up searching for work, this might make the labor force participation rate a fairly more solid figure than the unemployment rate. The unemployment numbers don't consider the individuals who have given up searching for work.

A few financial experts contend that the labor force participation rate and unemployment data ought to be viewed as together with an end goal to better figure out an economy's real employment status.

Trends in the Participation Rate

Over the long term, the labor force participation rate has changed in light of economic, social, and demographic trends. It rose consistently through the last part of the 20th century, topping at 67.3% in April 2000. In 2008, as the Great Recession hit, the participation rate entered several years of steep decline, stabilizing at around 63% by 2013.

62.3%

The U.S. labor force participation rate in May 2022, as per the Bureau of Labor Statistics.

Economic factors

Short-and long-term economic trends can influence the labor force participation rate. Over the long haul, industrialization and the accumulation of wealth can have an impact.

Industrialization will in general increase participation by setting out employment open doors. High levels of accumulated wealth can reduce participation in light of the fact that wealthier individuals just have less need to work professionally.

In the short term, business cycles and unemployment rates influence the participation rate. During an economic recession, the labor force participation rate will in general fall in light of the fact that many laid-off workers become discouraged and quit any pretense of searching for occupations. Economic policies, for example, heavy labor market regulation and liberal social benefit programs may likewise will more often than not decline labor force participation.

Social factors

The trend in the ladies' labor force participation rate largely matches the long-term trends for the total population. The ladies' labor force participation rate almost multiplied, from 32% to 60%, in the a long time from 1948 to 1998. The ladies' participation rate has since dropped because of the COVID-19 pandemic to 54.6% in April 2020, from 57.9% in Feb. 2020.

Demographic factors

Changes in the working-age population from one generation to another influence labor force participation too. As large age accomplices enter retirement age, the labor force participation rate can fall.

The retirement of a constant flow of baby boomers has reduced labor force participation. As per the Federal Reserve, the share of prime-working-age individuals (25 to 54 years of age) in the labor force crested at 72% in 1995 and declined to 63.7% throughout the next 25 years. This generally compares to a portion of the declining trends in labor force participation in the 21st century.

An increase in college attendance at the more youthful finish of the age range is another factor that reduces labor force participation. College enrollment by 18-to 24-year-olds increased from around 35% to 41% from 2000 to 2018. Notwithstanding, enrollment rates have dropped due to the pandemic, with undergrad enrollment declining 7.8% from fall 2019 to fall 2021.

Global Labor Force Participation

Global labor force participation has shown a consistent decline beginning around 1990. As per the World Bank, the global labor force participation rate remained at 58.6% toward the finish of 2020, down from 62.4% in 2010.

Starting around 2020, the countries with the highest labor force participation rates (of 80% or higher) were Qatar, Madagascar, Zimbabwe, the Solomon Islands, Rwanda, United Arab Emirates, and Tanzania. The countries with the lowest labor force participation rates (of 40% or below) were Yemen, Jordan, Algeria, Moldova, and Tajikistan, plus the U.S. domain of Puerto Rico.

Highlights

• Global labor force participation has shown a consistent decline starting around 1990.
• Starting in 2013, the U.S. labor force participation rate held consistent around 63% until the COVID-19 pandemic struck. It was 62.3% as of May 2022.
• The labor force participation rate demonstrates the percentage surprisingly of working age who are employed or are actively seeking work.
• Related to the unemployment numbers, it can offer some point of view into the state of the economy.
• The rate differs over the long run in view of social, demographic, and economic trends.

FAQ

What Does the Labor Force Participation Rate Measure?

The labor force participation rate measures a country's active workforce of individuals 16 and more seasoned. It considers individuals who have stopped searching for work yet at the same time need to work, not at all like the unemployment rate.

What Affects the Labor Force Participation Rate?

Three major factors influence the rate: economic, demographic, and social. For example, the recent retirement of baby boomers in great numbers has pushed the rate down, while the presentation of large numbers of ladies into the workforce in the last part of the 20th century increased the rate. In April 2020, after the COVID-19 pandemic struck the U.S., the rate went down by over 3% compared to the beginning of that year.

How Does the U.S. Rate Compare With Those of Other Countries?

The latest global data dates to 2020, and it shows the U.S. essentially in the center of the pack at 61%, two points ahead of the world rate of 59%. There were 87 countries with a higher rate, 91 countries with a lower rate, and eight countries with a similar rate (counting Germany, Ireland, and Russia). As of May 2022, the U.S. rate as a round number stands at 62.3%.