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Declining Labor Force Attachment and Downward Trends in Unemployment and Participation

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  • Barnichon, Regis

    (Board of Governors of the Federal Reserve System (U.S.))

  • Figura, Andrew

    ()
    (Board of Governors of the Federal Reserve System (U.S.))

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    Abstract

    The U.S. labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock-flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through unemployment, while other nonparticipants enter the labor force mostly through employment.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2013-88.

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    Length: 37 pages
    Date of creation: 01 Oct 2013
    Date of revision:
    Handle: RePEc:fip:fedgfe:2013-88

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    Related research

    Keywords: Unemployment rate; labor force participation rate; individuals marginally attached to the labor force;

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