Saturday, January 09, 2010

Labor Force Participation Rate

by Bill McBride on 1/09/2010 12:02:00 PM

There have been a number of comments about the recent collapse in the labor force participation rate. The rate has declined from 65.4% in July to 64.6% in December.

If the participation rate was at the same level as in July, the unemployment rate would probably be around 10.8%.

This gives me an excuse for a long term graph.

Labor Force Participation Rate Click on graph for larger image in new window.

This graph shows the total participation rate, and for men and women, starting in 1948. Although there are still far more men in the labor force than women (we are talking labor force, not payroll jobs!), the participation rate for men has been declining for decades. The participation rate for women was increasing steadily until the late 90s, and has decreased slightly since then.

However, since July, the participation rate for both men and women has fallen sharply. For men, the rate has fallen from 72.0% to 71.0%, or a decline of 801,000 men.

For women, the rate has fallen from 59.2% to 58.6%, or a decline of 491,000 women.

This is a total of almost 1.3 million people who have left the labor force since July. This is a key reason the unemployment rate is only at 10.0%.