The Great Resignation Is Latest in Labor Force Participation Decline. Where are The Missing Men?
Over the past 50 years, male labor force participation in the United States has fallen over 10 percentage points, from 80 percent in January 1970 to 69 percent in January 2020. During the COVID-19 pandemic, it has fallen further. Over the same half-century, the male share of undergraduate college enrollment has fallen considerably as well, from 58 percent to 44 percent.
This week, Smith's Research & Gradings will begin examining what factors are behind these declines and what these figures may mean for credit quality. The Labor Force Participation (LFP) rate is particularly important because of this week's upcoming jobs data. Over the past year, unemployment levels have dropped to 3.7% (seasonally adjusted), but LFP has remained a close to record low levels. Why do 37% of the people chose not to work?
Laura Dawson Ullrich is a senior regional economist at the Charlotte branch of the Federal Reserve Bank of Richmond who published a report on LFP in March of 2021. Previously, Ms. Ullrich was associate dean for undergraduate programs and a professor of economics at Winthrop University in South Carolina.
Ms. Dawson explained, "The term 'labor force participation,' or LFP, is used often in economic discussions. Simply put, the labor force is defined as those who are working or actively looking for work. The LFP rate is defined, in turn, as the percentage of the civilian noninstitutional population ages 16 and older that is in the labor force." (The civilian noninstitutional population excludes individuals who are active-duty military, imprisoned, or confined to residential care facilities, such as nursing homes.)
Her study spanned the last 50 years. She divided the half-century into two periods for LFP. First, the LFP rate in the United States grew steadily beginning in the late 1960s as women entered the labor force in larger numbers. In January 1970, the national LFP rate stood at 60 percent; 30 years later, in January 2000, it peaked at 67 percent. The growth over those three decades was driven by a 17 percentage point climb in female LFP — from 43 percent to 60 percent — while male LFP declined over the same period by nearly 5 percentage points.
Second, since the peak in January 2000, the national LFP rate has fallen gradually from 67 percent to 63 percent in January 2020. Both male and female LFP fell between 2000 and 2020, with female LFP falling 2.3 percentage points during that period and male LFP falling 5.8 percentage points.
She added, "And then there was COVID-19. The pandemic brought numerous shocks to the labor market, including a significant shock to LFP. After a low of 60 percent in April 2020, early in the lockdown period, the LFP rate has recovered slightly to 61 percent as of January 2021. Since the pandemic began, the female LFP rate has taken a slightly larger hit than the male LFP rate, falling 2.1 and 1.8 percentage points, respectively, between January 2020 and January 2021."
Male LFP in the Fifth Fed District
Are the national patterns similar in the Richmond Fed District (including WV, VA, NC, SC, DC)? Examining state-level LFP data between January 1976, when state-level LFP was first reported, and February 2021 reveals major differences in trends among the Federal Reserve's Fifth District jurisdictions.
West Virginia's LFP was far below that of the other Fifth District jurisdictions in 1976, with a rate of 52 percent, while the other states and the District of Columbia ranged between a narrow band of; 65 percent to 67 percent. By March 2020, right before the COVID-19 pandemic was felt in LFP, West Virginia had increased its LFP rate to 57 percent — a marked increase, though still lower than the other Fifth District jurisdictions. Only Mississippi has a lower LFP in the nation.
Smith's Research & Gradings would contrast the labor force participation of WV to the island of Puerto Rico. The June 2022 economic figure showed the Commonwealth of Puerto Rico's LFP is 42.5%, up from 42.3%.
The range of the others had widened significantly, from 59 percent in South Carolina to 73 percent in the District of Columbia.
South Carolina and North Carolina saw significant decreases in LFP between the national peak in the LFP rate in January 2000 and March 2020. While most other states saw slight increases or decreases of 1.6 percentage points in the LFP rate over the 20-year period, North Carolina and South Carolina saw declines of 7.7 and 7.6 percentage points, respectively. Conversely, the District of Columbia saw an increase in the LFP rate of 5.2 percentage points over the same period.
While the overall LFP rate is helpful in looking at changes in the labor market, there's a narrower statistic that can be more informative. Studies of LFP often focus on prime-age LFP, which limits the population to those ages 25 to 54. These individuals are less likely to be retired or in school; therefore, prime-age LFP focuses directly on those who are most likely to be working or seeking work. As with the overall LFP rate, the prime-age LFP rate peaked in 2000 at 85 percent. The prime-age male LFP rate, which was 96 percent in January 1970, had fallen to 89 percent 50 years later in January 2020.