by Bill McBride on 12/04/2010 04:34:00 PM
Saturday, December 04, 2010
The collapse in the labor force participation rate has been one of the key stories of the great recession. The participation rate is the percentage of the working age population in the labor force.
The labor force participation rate has fallen from 66.2% in May 2008 to just 64.5% in November 2010.
A few weeks ago I looked at Labor Force Participation Rate: What will happen?. I looked at the aging of the population and concluded that the participation rate will probably increase to around 66% over the next 5 years before declining again - and that will keep upward pressure on the unemployment rate.
However one of the key trends has been the decline in the participation rate of men - and that is continuing.
Click on graph for larger image.
This graph shows the changes in the participation rates for men and women since 1960 (in the 25 to 54 age group - the prime working years).
The participation rate for men in this key demographic fell to a record low 88.8% in November.
An important question is: how much of the recent decline in this key participation rate is cyclical because of the recession, and how much is part of the long term trend. We won't know for sure until the labor market starts to recover.