Not Looking for Work: Why Labor Force Participation Has Fallen During the Recession

Abstract

The post-recession economy has undergone the slowest recovery in 70 years. In addition to more than 8 percent unemployment, labor force participation has fallen sharply since the recession began in December 2007. Today, 6.4 million fewer Americans are working or searching for work. The drop in unemployment since 2009 is almost entirely due to the fact that those not looking for work do not count as unemployed. Demographic factors explain one-quarter of the decreased labor force participation. The rest comes from increased school enrollment and more people collecting disability benefits. Six percent of U.S. adults are now on disability insurance. This is no time to make it more difficult for businesses to create jobs.

The American economy is experiencing the slowest recovery in 70 years. In addition to persistently high unemployment, labor force participation has fallen sharply since the recession began in December 2007. Today, 6.4 million fewer Americans are working or looking for work. This drop accounts for virtually the entire reduction of the unemployment rate since 2009—those not looking for work do not count as unemployed.

Demographic changes explain approximately one-quarter of the drop in labor force participation. The baby boomers are aging and thus more likely to retire, dropping out of the labor force. The remaining drop in participation primarily comes from millions more people going on disability insurance or attending school. While those enrolled in school will probably return to the labor force, those going on the disability rolls will not. They will remain permanently outside the labor force.

 

Via: Heritage

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