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Labor force participation: Is a trend or a cycle at work?

One major concern since the start of the recent recession has been the labor force participation rate. The graph above shows a clear and continuing decline. However, when you reveal the full sample, as shown in the graph below, you can see the decline started before the recession and the current level is not the lowest in postwar history. It appears, then, at least part of the current evolution of labor force participation has to do with a longer-term trend. What forces are at work here? Clearly, the rise in labor force participation had to do with many women entering the labor force. The subsequent decline has to do with the aging of the population, with a significant increase in the proportion of retirees. Also, the younger population is staying in school longer than before. Articles by Marianna Kudlyak and Maria Canon and Marianna Kudlyak provide more insight on this topic.

How these graphs were created: For the first, search for and add “Civilian Labor Force Participation” to the graph, but restrict the range to start in January 2008. (Note: The seasonally adjusted series is much easier to read.) To add the trend line, go to “Add Data Series” and select “Trend Line” from the pull-down menu: Start the line at 2008-01-01, with the value of 66.2. For the second, create the same graph but use the full sample, which starts in 1948.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: CIVPART

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