How is the Labor Force Participation Rate Measured?

by Causes | 12.20.20

This content leverages data from USAFacts, a non-profit that visualizes governmental data. You can learn more on its website, Facebook, and Twitter.

What is the labor force participation rate?

• One of the most significant data points referenced in economic reports is known as the labor force participation rate, which plays an important role in determining the unemployment rate.
• The labor force participation rate is the percentage of the working-age population ― which is defined as the civilian, non-institutional population age 16 and up in the labor force. It measures how many Americans are either working or actively seeking, and is the sum of the employed population and the unemployed population (defined as jobless individuals who have looked for work in the last month).
• Changes in the labor force participation rate can lead to corresponding shifts in the unemployment rate. For example, if total employment holds constant but more unemployed Americans stop looking for work, the unemployment rate will fall due to decreased participation in the labor force. Conversely, if total employment remains steady and new graduates enter the labor force or more unemployed Americans resume their job search, the unemployment rate will rise even though no jobs have disappeared.

What are the recent trends in the labor force participation rate?

• Since the labor force participation rate peaked at 67.3% in early 2000, it has declined in part due to the aging of the U.S. population. This USAFacts chart shows the seasonally adjusted labor force participation rate over the last 50 years:

• Before the coronavirus pandemic, the labor participation rate was 63.4% in February but declined to 60.2% in April amid the economic lockdowns imposed to slow the spread ― its lowest level since 1973. By November, the labor force participation rate had rebounded to 61.5%, although it was still lower among all age groups compared to February as this USAFacts chart shows:

• The labor force participation rate tends to be lower for younger Americans, who may be pursuing academics or vocational training instead of employment, and among older Americans who are more likely to be retired.
• In addition to the above variations based on age, differences in the labor force participation rate can also be seen based on race and sex as this USAFacts chart shows:

• While the labor force participation rate declined during the pandemic across demographic groups for all Americans over the age of 20, it was the steepest for Hispanic women (down 5.7 percentage points), Black men and women (drops of 4.6 and 4.4 points, respectively), and Hispanic men (down 3.9 points).

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