The Long-Lived Cyclicality of the Labor Force Participation Rate

Tomaz Cajner, John Coglianese and Joshua Montes
Additional contact information
John Coglianese: https://www.federalreserve.gov/econres/john-m-coglianese.htm
Joshua Montes: https://www.federalreserve.gov/econres/joshua-k-montes.htm

No 2021-047, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: How cyclical is the U.S. labor force participation rate (LFPR)? We examine its response to exogenous state-level business cycle shocks, finding that the LFPR is highly cyclical, but with a significantly longer-lived response than the unemployment rate. The LFPR declines after a negative shock for about four years—well beyond when the unemployment rate has begun to recover—and takes about eight years to fully recover after the shock. The decline and recovery of the LFPR is largely driven by individuals with home and family responsibilities, as well as by younger individuals spending time in school. Our main specifications measure cyclicality from the response of the age-adjusted LFPR, and we show that it is problematic to use the unadjusted LFPR when estimating cyclicality because local shocks spur changes in the population of high-LFPR age groups through migration. LFPR cyclicality varies across groups, with larger and longer-lived responses among men, younger workers, less-educated workers, and Black workers.

Keywords: Labor force participation; Labor supply; Labor force composition; Labor force demographics; Full employment; Okun’s law; Geographic mobility; Labor mobility; Regional migration (search for similar items in EconPapers)
JEL-codes: E24 J21 J22 J61 J64 (search for similar items in EconPapers)
Pages: 48 p.
Date: 2021-07-30
New Economics Papers: this item is included in nep-isf, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2021047pap.pdf (application/pdf)

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:fedgfe:2021-47

DOI: 10.17016/FEDS.2021.047

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().