Let’s Cut the Crap — Labor Force Participation Rate

Big Red Car here on a wonderful Friday in the ATX, y’all. It is going to be a nice warm, sunny day.

Only a few days until Longhorn football. Going to be playing the Fighting Irish under the eyes of Touchdown Jesus in South Bend.

“So, Big Red Car, what is up with the labor force participation rate?” asks a reader.

Labor Force Participation Rate Defined

The labor force participation rate is the ratio of:

1. The number of people currently employed plus those seriously looking for work; and,

2. The total number of people in the US population who “could” be able to work.

Another way to say the same thing is — the total employed and unemployed divided by the total work force in the US.

What does it mean, Big Red Car?

Like everything else in economics, the answer is dependent upon who you ask. Some folks think it is a “canary in the mineshaft” omen which signals that the economy is not really as rosy as unemployment numbers would suggest.

Other folks think it is more of a demographic indicator suggesting a shift in the work patterns of America.

An example of how that might have worked in the past is the addition of women to the work force which increased the work force participation rate as these women took jobs while they had previously had been in the work force but not actively working. The labor force participation rate went up rather dramatically.

Look at this graph to see the impact since 1990.

Please note that this graph is for the demographic slice of 25-54 as it is intended to signal the most active slice of workers. It could go farther in both directions.

For a longer term view, take a look at this link.

Labor Force Participation Rate since World War II.

Note how the rate increases steadily from the mid-1960s until about 2000 and how it has declined steadily since then with a more precipitous slide since the Great Recession of 2007.

Bottom line it, Big Red Car

In the view of the Big Red Car — who is an admitted “omen — canary in the mineshaft” advocate — it indicates that the recent gains in unemployment are a head fake and that the economy continues to drift. The Big Red Car would also note that the recent Q2 GDP growth numbers at 3.7% are a good thing but still much too low for a truly recovering economy.

If you cannot get enough of the Labor Force Participation Rate, read this article.

LFPR article FRED

You will get a very good treatise on what the Labor Force Participation Rate is and is not. It is a twelve page treatise by the St Louis FED Chairman. It is a very fair discussion of the subject and the most useful one I have ever stumbled on. Read it.

Also, remember when we spoke of the same subject before? Oh, yeah, here it is.

Labor Force Participation Rate at 38 Year Low

So, now you know.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. It’s Friday, be kind to someone who will be surprised by your kindness. You can do it.






7 thoughts on “Let’s Cut the Crap — Labor Force Participation Rate

  1. Some of it is due to old baby boomers leaving the workforce-but govt keeps redefining the meaning of looking for work and jobs. We have a lot of unemployed in the US right now that are uncounted. If we didn’t neither Sanders or Trump would have a following.

    • .
      Interestingly enough the participation in the labor force by 65+ is increasingly in a meaningful way. I have a chart and will post it soon. Another blog post.

      I was surprised but then folks can’t afford to retire can they?

      Broke, living too long, etc.

      I think America is overflowing with talent and folks who want to work which is why the SBA and immigration are so important.

      Stay well.


  2. Dear BRC! Thanks for this post, and may I add, all your posts. I encountered you about six weeks ago, and this little patch of yours is a source of great inspiration and clear thinking.

    I’m not an economist, but try to follow the discussion. These charts line up so closely with what I see happening around me, a sense of sooo much unused human potential just waiting to get going, that somehow can’t get going. Don’t know how else to explain or express it.

    Me, I’m so happy to be doing what I’m doing, where I’m doing it, with the people I love–no whines here. I do wish I could spread the joy a bit more, though. That’s one reason I read your thoughts–you seem to have that ability.

    Have a wonderful weekend, and thanks again.

  3. The goverment has some seriously messed up definitions of “employed” so I generally take data around that with a grain of salt. Maybe the decline isn’t so much a bellwether of a declining economy, but a shift in how people are working these days, combines with some BLS fuzzy math.

    For fun, here is a video I produced a few years ago on the topic. https://www.youtube.com/watch?v=Ulu3SCAmeBA

Comments are closed.