Demographic versus Cyclical Influences on US Labor Force Participation

William Cline and Jared Nolan ()
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Jared Nolan: Peterson Institute for International Economics

No WP14-4, Working Paper Series from Peterson Institute for International Economics

Abstract: This paper applies time series analysis to distinguish between cyclical and demographic causes of the decline of the labor force participation rate. Some public discussions suggest that the decline of US unemployment from its 2009 peak of 10 percent to about 6 percent by mid-2014 grossly exaggerates recovery because most of the decline reflects the exit of discouraged workers from the labor force. This study finds instead that one-half to two-thirds of the decline in labor force participation by about 3 percentage points from late 2007 to early 2014 is attributable to aging of the population. Although about one-third is found attributable to the lagged influence of high, and especially long-term, unemployment, going forward the potential rebound in the participation rate from recovery is projected to be approximately offset by further aging of the population.

Keywords: labor force participation; aging; unemployment (search for similar items in EconPapers)
JEL-codes: E52 J11 J21 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-age, nep-lab and nep-mac
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Citations: View citations in EconPapers (1)

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