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Interpreting the recent decline in labor force participation

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  • Willem Van Zandweghe

Abstract

At the turn of the 21st century, labor force participation in the United States reversed its decades-long increase and started trending lower. In the four years since the start of the recent recession, the labor force participation rate experienced a far bigger drop than in any previous four-year period. ; To disentangle the roles of long-term trend factors?such as demographic shifts?and the recession in the recent drop in participation, Van Zandweghe examines a variety of evidence, including data on demographic shifts, labor market flows, gender differences, and the effects of long-term unemployment. ; The evidence indicates that long-term trend factors account for about half of the recent decline in labor force participation, with the recession accounting for the other half.

Suggested Citation

  • Willem Van Zandweghe, 2012. "Interpreting the recent decline in labor force participation," Economic Review, Federal Reserve Bank of Kansas City, issue qi, pages 5-34.
  • Handle: RePEc:fip:fedker:y:2012:i:qi:p:5-34:n:v.97no.1
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    References listed on IDEAS

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    1. Joyce Kwok & Mary C. Daly & Bart Hobijn, 2010. "Labor force participation and the future path of unemployment," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue sep13.
    2. Shigeru Fujita, 2011. "Effects of extended unemployment insurance benefits: evidence from the monthly CPS," Working Papers 10-35, Federal Reserve Bank of Philadelphia, revised 2011.
    3. Stephanie Aaronson & Bruce Fallick & Andrew Figura & Jonathan Pingle & William Wascher, 2006. "The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 69-154.
    4. Daniel Aaronson & Kyung-Hong Park & Daniel G. Sullivan, 2006. "The decline in teen labor force participation," Economic Perspectives, Federal Reserve Bank of Chicago, issue qi, pages 2-18.
    5. Daniel Aaronson & Bhashkar Mazumder & Shani Schechter, 2010. "What is behind the rise in long-term unemployment?," Economic Perspectives, Federal Reserve Bank of Chicago, issue qii, pages 28-51.
    6. Riccardo DiCecio & Michael T. Owyang & Christopher H. Wheeler & Kristie M. Engemann, 2008. "Changing trends in the labor force: a survey," Review, Federal Reserve Bank of St. Louis, issue jan, pages 47-62.
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