Aggregate Labor Force Participation and Unemployment and Demographic Trends
Andreas Hornstein and
No 19-8, Working Paper from Federal Reserve Bank of Richmond
We estimate trends in the labor force participation (LFP) and unemployment rates for demographic groups differentiated by age, gender, and education, using a parsimonious statistical model of age, cohort, and cycle effects. Based on the group trends, we construct trends for the aggregate LFP and unemployment rate. Important drivers of the aggregate LFP rate trend are demographic factors, with increasing educational attainment being important throughout the sample, ageing of the population becoming more important since 2000, and changes of groups' trend LFP rates, e.g., for women prior to 2000. The aggregate unemployment rate trend on the other hand is almost exclusively driven by demographic factors, with about equal contributions from an older and more educated population. Extrapolating the estimated trends using Census Bureau population forecasts and our own forecasts for educational shares, we project that over the next 10 years the trend LFP rate will decline to 61.1% from its 2018 value of 62.7% and the trend unemployment rate will decline to 4.3% from its 2018 value of 4.7%.
Keywords: Labor Force Participation Rate; Unemployment Rate; Demographic Composition; Age Effects; Cohort Effects; Educational Attainment. (search for similar items in EconPapers)
Pages: 36 pages
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https://www.richmondfed.org/-/media/richmondfedorg ... ers/2019/wp19-08.pdf Full text (application/pdf)
https://www.richmondfed.org/-/media/richmondfedorg ... regate_lfp_rate.xlsx Aggregate labor force participation rate and unemployment rate (application/vnd.ms-excel)
https://www.richmondfed.org/-/media/richmondfedorg ... onal_attainment.xlsx Educational attainment of the U.S. working-age population (application/vnd.ms-excel)
Working Paper: Aggregate Labor Force Participation and Unemployment and Demographic Trends (2019)
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