- The labor force participation rate measures the share of the population actively participating in the labor market. This includes individuals currently employed and those actively looking for work.
- Despite the strength of the labor market in this record-long expansion, the labor force participation rate has not recovered to pre-crisis levels. This is partially attributable to changing demographics, including an aging population.
- To account for demographic changes, we can adjust the labor force participation by assuming the demographic distribution of a chosen base year. While the year selected does not matter, it allows the comparison of the labor force participation among the same population of individuals.
- Assuming the distribution in 2007, we see that the labor force participation rate has largely recovered to pre-crisis levels.
- The adjusted labor force participation rate in 2019 was 65.6 percent, whereas the unadjusted rate was 63.1 percent. In 2007, the unadjusted labor force participation rate was 66.0 percent.
There has been concern in some corners that the U.S. labor force participation rate has not returned to pre-crisis levels, especially given the record-long expansion and low unemployment rate. This is partially attributable to changing demographics, including an aging population. In the 12 years since 2007, many of these workers have entered age cohorts that have lower rates of labor force participation. This makes for an apples-to-oranges comparison between the labor force participation rate in 2007 and 2019. To better compare the labor force participation rate across time, we fix the demographics of the U.S. population to a given point in time, following Szafran (2002). Though we chose 2007 to allow for easy comparison before and after the financial crisis, we could choose any point in time. The results show that the adjusted U.S. labor force participation rate has largely recovered to pre-crisis levels.