Labor Force Participation Decomposition

labor force participation decomposition

(Council of Economic Advisers)

Just in time to follow up on yesterday’s post regarding economic participation and the structural/cyclical debate in macroeconomics, a new report from the White House says about 33% of the decline in the labor-force participation rate is due to structural factors — “the factors beyond aging and cyclicality.”  The Washington Post has two theories to help explain these factors: 1) length of unemployment is longer, therefore what we traditionally consider “out of the labor force” is actually just “still looking for work but taking a really long time,” and 2) “when the recession started, the labor market was already much weaker than was widely recognized,” especially amongst men and minorities.  Meanwhile, it is a really great time to be in the family counseling business: “A record 57 million Americans — or 18.1% of the population — lived in multi-generational households in 2012…The rate, up from 17.8% in 2011, has been on a steady march upward since its post-World War II low in 1980, when just 12.1% of the population utilized these arrangements.”  Theories behind this trend include: 1) the breakdown of retiree’s ability to live independently, 2) the breakdown of Millennials’ ability to make it on their own, and 3) growing minority populations, for whom multi-generational households are more prevalent.