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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

A new trend in GDP?

Let’s look at real gross domestic product for the United States. To help us, we’ll also use a new feature of FRED graphs: custom lines. This feature can be useful to highlight a new trend that emerges as additional data points are added. The graph shows that the U.S. economy seems to be on a new trend, with a similar growth trend as before but a notch lower. It looks as if the economy lost a few years of growth during the previous recession and is now back on track. It this the whole story? Of course not. There’s much more to measuring the health of the economy than just GDP. But this particular development is quite startling.

How this graph was created: Start with a graph of quarterly real GDP. Select the starting date of 1994-10-01, either by typing that date in the box above the graph or by moving the ruler below the graph. For the first trend line, use the “Add a Series” feature and select “Trend Line” from the pull-down menu. By default, it creates a line from the first to the last data point in the visible range. Change the end date of that line to 2007-10-01 and associate with it the value of GDP at that date. (To do so, hover over the graph to find the value for that date and then add that end value to the trend line.) Add the second trend line in a similar way, but start at 2009-10-01. Finally, change the color of the second trend line to burgundy to match the first.

Suggested by Christian Zimmermann

View on FRED, series used in this post: GDPC1


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