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Why Is Labor Force Participation Shrinking?

September 5, 2012 at 4:18 PM
Kathy Ruffing

With the latest jobs report coming out Friday, the Congressional Budget Office's (CBO) recent budget and economic update provides important context for one closely watched figure: the labor force participation rate.

The percentage of people over age 16 who are working or actively seeking work has slipped fairly steadily for the past few years. CBO says a big reason is "the economic downturn [and] weak growth in output during the recovery." In other words, the recession and lack of job opportunities have driven many people from the labor force.



Labor market participation traditionally peaks between ages 25 and 54. At those ages, roughly 80 percent or more of people are working or looking for work. At younger or older ages, though, the percentage drops -- tapering off to fewer than 10 percent of people 75 or older, as the graph shows.


Back in 2002, the Labor Department presented an alternative, age-adjusted measure of overall labor force participation. We wish it would keep this series up to date and give it the same prominence as the overall rate. That'd help policymakers and journalists understand the numbers.
