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October 2006, Vol. 129, No. 10
Trends in labor force participation in the United States
Abraham Mosisa and Steven Hipple
The labor force participation rate—the proportion of the working-age population either working or actively looking for work—is an important labor market measure because it represents the relative size of labor resources available in the production of the Nation’s goods and services.1 After rising fairly steadily for more than five decades, the labor force participation rate peaked at 67.1 percent in the late 1990s. However, since 1999, the rate has receded—to 66.0 percent in 2004–05. (See chart 1 and table 1.)
The decrease in labor force participation in recent years occurred across most of the major age-sex groups. (See chart 2 and table 1.) The participation rate for persons aged 16 to 24 years—especially teenagers aged 16 to 19 years—dropped sharply. Among individuals aged 25 to 54 years, the rate for women decreased after rising steadily for more than a half century. The rate for men aged 25 to 54 years continued its long-term decline, reaching an all-time low in 2005. Since about 1995, however, a dramatic increase in labor force participation among individuals aged 55 years and older bucked these trends.
In the short term, the participation rate is procyclical. That is, the rate increases during economic expansions, when more individuals join the labor force because jobs are easier to find, and falls during economic downturns, as individuals leave the labor force altogether in response to relatively fewer job opportunities. In addition to cyclical influences, longer term structural factors have had an important impact on labor force participation. Among these factors are changes in the age composition of the population, changes in the propensity of women to participate in the labor force, a rise in school enrollment, and changes to employer-provided private pensions and Social Security.
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1 The working-age population consists of the civilian noninstitutional population aged 16 years and older who reside in the 50 States and the District of Columbia. This group excludes inmates of institutions (for example, mental and penal institutions, and homes for the aged) and persons who are on active duty in the Armed Forces.
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