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Additional slack in the economy: the poor recovery in labor force participation during this business cycle

Author

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  • Katharine L. Bradbury
Abstract
This public policy brief examines labor force participation rates in this recession and recovery and compares them with the cyclical patterns in earlier business cycles. Measured relative to the business cycle peak in March 2001, labor force participation rates almost four years later have not recovered as much as usual, and the discrepancies are large. ; Among age-by-sex groups, the participation shortfall is especially pronounced at young and prime ages: Only for men and women age 55 and older has participation risen more than is usual four years after the business cycle peak. ; The brief examines explanations and different recovery scenarios for various groups?older workers, women, teens. Depending on the scenario, the current labor force shortfall ranges from 1.6 million to 5.1 million men and women. With 7.9 million people currently unemployed, the addition of these hypothetical participants would raise the unemployment rate by 1 to 3-plus percentage points. Current low rates of labor market participation thus potentially represent considerable slack in the U.S. labor market. ; This brief is based on materials presented in briefings to the President and Academic Advisory Council of the Federal Reserve Bank of Boston in March and April 2005.

Suggested Citation

  • Katharine L. Bradbury, 2005. "Additional slack in the economy: the poor recovery in labor force participation during this business cycle," Public Policy Brief, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbpb:y:2005:n:05-2
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    Citations

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    Cited by:

    1. Chad D. Cotti & Scott Drewianka, 2007. "Labor Market Inefficiency and Economic Restructuring: Evidence from Cross‐Sectoral Data," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 214-238, July.
    2. Dunsch, Sophie, 2016. "Does labor force participation rates of youth vary within the business cycle? Evidence from Germany and Poland," Discussion Papers 386, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    3. Julie L. Hotchkiss, 2005. "What’s up with the decline in female labor force participation?," FRB Atlanta Working Paper 2005-18, Federal Reserve Bank of Atlanta.
    4. Julie L. Hotchkiss & M. Melinda Pitts & Mary Beth Walker, 2008. "Working with children? the probability of mothers exiting the workforce at time of birth," FRB Atlanta Working Paper 2008-08, Federal Reserve Bank of Atlanta.
    5. Riccardo DiCecio & Kristie M. Engemann & Michael T. Owyang & Christopher H. Wheeler, 2008. "Changing trends in the labor force: a survey," Review, Federal Reserve Bank of St. Louis, vol. 90(Jan), pages 47-62.
    6. Schreiber, Sven, 2009. "Explaining shifts in the unemployment rate with productivity slowdowns and accelerations: a co-breaking approach," Kiel Working Papers 1505, Kiel Institute for the World Economy (IfW Kiel).
    7. Julie L. Hotchkiss & John C. Robertson, 2012. "Asymmetric labour force participation decisions," Applied Economics, Taylor & Francis Journals, vol. 44(16), pages 2065-2073, June.
    8. Alcaraz Carlo & García Verdú Rodrigo, 2006. "Changes in the Composition of Employment and Productivity in the Formal Sector of the Mexican Economy," Working Papers 2006-03, Banco de México.
    9. Timothy G. Schiller, 2005. "After the baby boom: population trends and the labor force of the future," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 30-43.
    10. Todd E. Clark & Taisuke Nakata, 2006. "The trend growth rate of employment : past, present, and future," Economic Review, Federal Reserve Bank of Kansas City, vol. 91(Q I), pages 43-85.
    11. Katharine L. Bradbury, 2006. "Measurement of unemployment," Public Policy Brief, Federal Reserve Bank of Boston.

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    Keywords

    Labor supply; Business cycles;

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