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Economic Brief

August 2013, No. 13-08

Will a Surge in Labor Force Participation Impede Unemployment Rate Improvement?

Andreas Hornstein and Karl Rhodes

The labor force participation rate has been falling since 2000, a trend that accelerated somewhat during the recession of 2007-09. Some economists and journalists have questioned whether recent improvements in the labor market will cause non-participants to re-enter the labor force at a faster rate, thus offsetting job growth and impeding further declines in the unemployment rate. But recent worker-flow research suggests that this scenario is unlikely.

Additional Resources

Daly, Mary, Early Elias, Bart Hobijn, and Òscar Jordà, "Will the Jobless Rate Drop Take a Break?" Federal Reserve Bank of San Francisco Economic Letter, December 2012.

Elsby, Michael W.L., Bart Hobijn, and Aysegul Sahin, "On the Importance of the Participation Margin for Labor Market Fluctuations," Federal Reserve Bank of San Francisco Working Paper 2013-05, February 2013.

Fujita, Shigeru, and Garey Ramey, "The Cyclicality of Separation and Job Finding Rates," International Economic Review, May 2009, vol. 50, no. 2, pp. 415–430. (A previous version is available online.)

Hornstein, Andreas, "The Cyclicality of the Labor Force Participation Rate," Manuscript, Federal Reserve Bank of Richmond, May 2013.

Kudlyak, Marianna, and Felipe Schwartzman, "Accounting for Unemployment in the Great Recession: Nonparticipation Matters," Federal Reserve Bank of Richmond Working Paper No. 12-04, June 2012.

Shimer, Robert, "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, April 2012, vol. 15, no. 2, pp. 127–148.

Toossi, Mitra, "Projections of the Labor Force to 2050: A Visual Essay," Bureau of Labor Statistics Monthly Labor Review, October 2012, pp. 3–16.

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