Morning Must-Read: Stephanie Aaronson et al.: Labor Force Participation: Recent Developments and Future Prospects

Stephanie Aaronson: Labor Force Participation: Recent Developments and Future Prospects: “More than five years after the Great Recession ended…

…the labor market has, by many metrics, finally shown substantial improvement. The unemployment rate is now nearly 4 percentage points below the peak reached in late 2009…. However, one lingering concern is the ongoing decline in the labor force participation rate and the concomitant absence of a significant rise in the percentage of the working-age population who are employed…. To an important extent, this decline in the labor force participation rate likely reflects the ongoing influence of the aging population…. Our overall assessment is that much–but not all–of the decline in the labor force participation rate since 2007 is structural in nature…. Policymakers can view some of the current low level of the participation rate as indicative of labor market slack beyond that indicated by the unemployment rate alone, they should not expect the participation rate to show a substantial increase from current levels as labor market conditions continue to improve…