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Declining Labor Force Attachment and Downward Trends in Unemployment and Participation

  • Barnichon, Regis

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

  • Figura, Andrew

    ()

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

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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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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