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Identifying Factors behind the Decline in the U.S. Labor Force Participation Rate

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  • Julie L. Hotchkiss

    ()

  • Fernando Rios-Avila

    ()

Abstract

The analysis in this paper finds that the dramatic decline in labor force participation during the Great Recession is more than explained by deteriorating labor market conditions (cyclical factors).Behavior adjusted over this time period to boost labor force participation so that it was higher in 2012 than would have been predicted by the model. Depending on the strength of the labor market going forward, we project anywhere from a further decline in the labor force participation rate of 0.8pp to an increase of 0.35pp by 2017.

Suggested Citation

  • Julie L. Hotchkiss & Fernando Rios-Avila, 2013. "Identifying Factors behind the Decline in the U.S. Labor Force Participation Rate," Business and Economic Research, Macrothink Institute, vol. 3(1), pages 257-275, June.
  • Handle: RePEc:mth:ber888:v:3:y:2013:i:1:p:257-275
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    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/3370/2921
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    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/3370
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    References listed on IDEAS

    as
    1. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, Elsevier.
    2. Willem Van Zandweghe, 2012. "Interpreting the recent decline in labor force participation," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-34.
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    Cited by:

    1. Kudlyak, Marianna, 2013. "A Cohort Model of Labor Force Participation," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 25-43.
    2. Borjas, George J., 2017. "The Earnings of Undocumented Immigrants," Working Paper Series rwp17-013, Harvard University, John F. Kennedy School of Government.
    3. George J. Borjas, 2016. "The Labor Supply of Undocumented Immigrants," NBER Working Papers 22102, National Bureau of Economic Research, Inc.
    4. Bullard, James B., 2014. "The rise and fall of labor force participation in the U.S," The Regional Economist, Federal Reserve Bank of St. Louis, April.
    5. Jeremy W Bray & Brooks Depro & Dorren McMahon & Marion Siegle & Lee Mobley, 2016. "Disconnected Geography: A Spatial Analysis of Disconnected Youth in the United States," Journal of Labor Research, Springer, vol. 37(3), pages 317-342, September.
    6. Bullard, James B. & Singh, Aarti, 2017. "Nominal GDP Targeting With Heterogeneous Labor Supply," Working Papers 2017-16, Federal Reserve Bank of St. Louis, revised 16 Jan 2019.
    7. Stephanie Aaronson & Tomaz Cajner & Bruce Fallick & Felix Galbis-Reig & Christopher Smith & William Wascher, 2014. "Labor Force Participation: Recent Developments and Future Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 197-275.
    8. Hotchkiss, Julie L., 2014. "Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength," FRB Atlanta Working Paper 2014-8, Federal Reserve Bank of Atlanta.
    9. Nucci, Francesco & Riggi, Marianna, 2018. "Labor force participation, wage rigidities, and inflation," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 274-292.
    10. Christopher J. Erceg & Andrew T. Levin, 2014. "Labor Force Participation and Monetary Policy in the Wake of the Great Recession," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(S2), pages 3-49, October.
    11. repec:eee:labeco:v:46:y:2017:i:c:p:1-13 is not listed on IDEAS
    12. George J. Borjas, 2017. "The Earnings of Undocumented Immigrants," NBER Working Papers 23236, National Bureau of Economic Research, Inc.
    13. Mark E. Schweitzer & Murat Tasci, 2013. "What constitutes substantial employment gains in today’s labor market?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jun.
    14. Hotchkiss, Julie L. & Moore, Robert E. & Rios-Avila, Fernando & Trussell, Melissa R., 2014. "Changes in family welfare from 1994 to 2012: a tale of two decades," FRB Atlanta Working Paper 2014-26, Federal Reserve Bank of Atlanta.
    15. repec:kap:reveho:v:15:y:2017:i:3:d:10.1007_s11150-016-9354-9 is not listed on IDEAS
    16. Bullard, James B., 2014. "The rise and fall of labor force participation in the United States," Review, Federal Reserve Bank of St. Louis, vol. 96(1), pages 1-12.
    17. Borjas, George J, 2016. "The Labor Supply of Undocumented Immigrants," Working Paper Series 16-012, Harvard University, John F. Kennedy School of Government.
    18. Leila Bengali & Mary C. Daly & Robert G. Valletta, 2013. "Will labor force participation bounce back?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may13.
    19. Levin, Andrew T., 2014. "The design and communication of systematic monetary policy strategies," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 52-69.
    20. David G. Blanchflower & Andrew T. Levin, 2015. "Labor Market Slack and Monetary Policy," NBER Working Papers 21094, National Bureau of Economic Research, Inc.
    21. Fernando Rios-Avila, 2015. "Losing Ground: Demographic Trends in US Labor Force Participation," Economics Policy Note Archive 15-7, Levy Economics Institute.

    More about this item

    Keywords

    Labor force participation; Oaxaca decomposition; Great Recession;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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