EconPapers    
Economics at your fingertips  
 

Cyclical versus secular: decomposing the recent decline in U.S. labor force participation

Michelle Barnes, Fabià Gumbau-Brisa () and Giovanni Olivei

Public Policy Brief, 2013

Abstract: Since the start of the Great Recession, one of the most striking developments in the U.S. labor market has been the pronounced decline in the labor force participation rate. The crucial issue in interpreting the decline in U.S. labor force participation is how much of the decline reflects cyclical factors and how much reflects more persistent developments such as the demographic effects of an aging population. We provide a decomposition of cyclical versus trend movements in the labor force participation rate, informed by the joint dynamics of this variable with the employment-to-population ratio. We find that since 2008 trend movements account for a significant portion of the decline in labor force participation. The cyclical response of the labor force participation rate over most of the Great Recession and ensuing recovery has been smaller than usual given the estimated cyclical behavior of the employment-to-population ratio. If the cyclical behavior of the labor force participation rate had followed historical norms, the unemployment rate over the period 2009?2011 would have been lower on average by roughly three-quarters of one percentage point. At this point, however, the unemployment rate should provide a fairly accurate signal of labor market conditions and further cyclical declines in labor force participation rates are unlikely to occur if the employment situation continues to improve.

Keywords: Labor market; Unemployment (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.bostonfed.org/economic/ppb/2013/ppb132.pdf (application/pdf)
http://www.bostonfed.org/economic/ppb/2013/ppb132.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbpb:y:2013:n:13-2

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Public Policy Brief from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-05-12
Handle: RePEc:fip:fedbpb:y:2013:n:13-2