Isabella Carter
The labor force in the US is made up of people who are either working or actively looking for work. The labor force participation rate has been declining for decades and currently hovers around 62.5-63%, down from 63.3% in February 2020 and 67.2% in January 2001. This decline has resulted in a smaller workforce and a labor shortage, with companies struggling to find enough workers to fill open jobs. Several factors have contributed to this shortage, including the pandemic, which pushed more than 3 million adults into early retirement, and demographic changes such as an aging population and lower birth rates.
| Characteristics | Values |
|---|---|
| Labor Force Participation Rate | 62.5% - 63% |
| Comparison to February 2020 | Down from 63.3% |
| Comparison to January 2001 | Down from 67.2% |
| Number of missing workers compared to February 2020 | 1.7 million |
| Number of missing workers if the rate was the same as February 2020 | Over 2 million |
| Adults 55+ detached from the labor force due to retirement, Q3 2019 | 48.1% |
| Adults 55+ detached from the labor force due to retirement, Q3 2021 | 50.3% |
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What You'll Learn
The labor force participation rate
The current labor force participation rate in the US has hovered around 62.5-63%, down from 63.3% in February 2020 and 67.2% in January 2001. This decline has contributed to a labor shortage, with many job openings going unfilled. As of October 2021, the pandemic drove more than 3 million adults into early retirement, further decreasing the labor force participation rate.
Several factors have contributed to the ongoing decline in the labor force participation rate. Firstly, the aging of the population has led to an increase in retirements, and the share of older individuals within the US population is expected to continue growing. Secondly, younger generations are having fewer children, resulting in a progressively older and diminishing population. Thirdly, higher-income and savings have bolstered people's economic stability, allowing some to sit out of the labor force. While high inflation is driving down savings accounts and pushing some back into the workforce, the overall labor force participation rate remains below pre-pandemic levels.
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Demographic changes
The interplay between age, health, and labor force participation is complex. While an aging population can lead to exits from the labor force, improvements in health can increase labor market integration for individuals with health limitations, thereby boosting labor force numbers. For example, narrowing the gap in labor force participation rates by health to levels seen in Sweden could increase the US labor force by 6.6% or 14.9 million people by 2060.
Education also influences demographic changes in the labor force. Increasing educational attainment can have a substantial effect on labor force participation, particularly towards the end of working careers. Reforms that enhance educational levels can significantly impact the labor force, with potential increases of nearly 1 million workers by 2060.
Additionally, immigration trends play a role in labor force dynamics. Slowing immigration rates, as seen in the US between the 1990s and the 2010s, contribute to restrained population growth and, consequently, labor force expansion. The dramatic drop in immigration during the pandemic further accentuated this trend.
Projections for the future of the US labor force vary. While the labor force is expected to grow by 16.2% or 25.2 million workers between 2020 and 2060, this growth will be influenced by changes in population size, age structure, educational attainment, and immigration patterns. These demographic factors will continue to shape the landscape of the US labor market in the coming decades.
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The impact of the pandemic
The COVID-19 pandemic has had a profound impact on the US labour force, causing the sharpest drop in employment since World War II. The pandemic has exacerbated existing inequalities and disproportionately affected specific demographics.
Lower-wage workers in the hospitality and service industries experienced some of the most significant job losses. The pandemic accelerated existing trends, such as the increase in remote work, which disproportionately impacted Black workers, who are underrepresented in "remote-compatible jobs". This shift to remote work also contributed to a childcare crisis, with working parents, especially mothers, struggling to balance work and childcare responsibilities.
The pandemic also triggered a wave of retirements, with older workers leaving the labour force earlier than expected. This trend contributed to a shrinking labour force, creating staffing challenges for employers. According to Wendy Edelberg, director of the Hamilton Project, "The COVID-19 recession is going to have scarring effects both on the business landscape and labour markets, and policymakers need to be preparing for those effects now."
However, the pandemic has also empowered lower-wage workers to demand better pay and working conditions. The tight competition for workers has led to a surge in labour organising and unionisation efforts, with workers testing their leverage. This shift has resulted in pay gains among lower-wage workers, slowing the growth of income inequality. Additionally, the pandemic has increased labour force participation among certain groups, such as women aged 25-54 and Black people aged 25-64, while labour force participation among white men over 20 has decreased.
Overall, the pandemic has had lasting effects on the US labour force, reshaping the business landscape and labour markets. While some industries have rebounded beyond pre-pandemic levels, the labour force remains smaller, and employers face challenges in finding workers.
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Job market health
The health of a job market can be assessed by examining labour force participation rates, the number of job openings, and the ability to fill those openings.
Labour Force Participation Rate
The labour force participation rate is defined as "the number of people in the labour force as a percentage of the civilian non-institutional population". In other words, it is the percentage of the population that is either working or actively looking for work. This rate is a key indicator of current labour market trends and helps gauge the overall health of the economy.
The current labour force participation rate in the US is around 62.5-63%, down from 63.3% in February 2020 and 67.2% in January 2001. This decline is partly due to demographic changes, such as an ageing population, with more adults over 55 retiring. Additionally, younger generations are having fewer children, resulting in a shrinking population.
Job Openings and Labour Shortage
While there are strong job markets in the US, many job openings are going unfilled. This is due to a labour shortage, with an insufficient number of workers to fill the available positions. As of May 2025, there are 1.7 million fewer Americans in the workforce compared to February 2020.
Several factors contribute to this labour shortage. One reason is that higher income and savings have enabled some, particularly women, to remain out of the workforce. Additionally, government benefit programs have been cited as a contributing factor to the labour shortage. However, high inflation is driving down savings, prompting many to return to the workforce.
Largest Civilian Workforce
The Department of Veterans Affairs is the largest agency in the federal civilian workforce outside of the Department of Defense, employing over 480,000 people. The Department of Homeland Security is also one of the largest agencies, with more than 222,000 employees.
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Government benefits programs
The US government offers a range of benefit programs to support its citizens in various areas of life. These programs are designed to provide assistance with essential needs and improve overall well-being. One of the critical aspects of government benefit programs is their focus on ensuring access to basic necessities. This includes helping individuals and families with food, housing, and medical expenses. Programs such as SNAP (Supplemental Nutrition Assistance Program) provide assistance in purchasing nutritious food, ensuring that no one goes hungry. Additionally, housing support is available through initiatives like Section 8 housing, which aids individuals and families in obtaining safe and affordable housing.
Another vital component of government benefit programs is their emphasis on education. Federal Student Aid programs enable individuals to pursue their academic goals by providing financial assistance for higher education. This support not only benefits the individuals but also contributes to a more educated society as a whole. Furthermore, government benefit programs also cater to the specific needs of certain groups. For instance, there are dedicated programs for veterans, disabled individuals, and low-income families, ensuring that they receive the necessary support and resources. These programs aim to address unique challenges and improve the quality of life for these groups.
Social Security is a fundamental aspect of government benefit programs. It provides a safety net for individuals throughout their lives, offering financial support during retirement, disability, or other unforeseen circumstances. Social Security checks can help seniors maintain their standard of living and provide assistance to those who are unable to work due to disabilities. Additionally, government benefit programs also extend to disaster relief and emergency situations. During challenging times, individuals and communities can rely on these programs for assistance, ensuring their well-being and helping them get back on their feet.
Government benefit programs also play a role in promoting overall community development. Federal grants are provided to states and organizations to support various initiatives and projects that benefit the public. These grants can be used for a wide range of purposes, such as improving infrastructure, supporting local businesses, or funding community programs. By investing in these grants, the government can stimulate economic growth, create jobs, and enhance the quality of life for citizens. Furthermore, government benefit programs also intersect with other areas of civic life, such as voting and elections. Resources are provided to help citizens understand their voting rights, locate their voting locations, and navigate the electoral process, empowering them to actively participate in shaping the country's future.
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Frequently asked questions
The labor force is defined by the Current Population Survey (CPS) as "the number of people in the labor force as a percentage of the civilian noninstitutional population." In other words, the percentage of the population that is either working or actively looking for work.
The current labor force participation rate in the US is around 62.5% to 63%, down from 63.3% in February 2020 and 67.2% in January 2001.
There are several factors that have contributed to the decline, including the aging population, with more people retiring, and younger generations having fewer children. Additionally, the pandemic drove more than 3 million adults into early retirement, and some women have cited family members earning enough money as a reason for not re-entering the workforce.
The decline in the labor force participation rate has resulted in a labor shortage, with companies across industries and states facing challenges in finding enough workers to fill open jobs.
