What’s happened to American workforce? Where have the workers gone? Along with inflation, these questions have become top of mind challenges across the U.S. — the new economic challenges post-COVID-19 pandemic.
While there’s as yet no silver bullet answer, this might be a good time to sift through the detail, piecing together the mosaic. This blog is intended to graphically and succinctly characterize the changing nature of labor force participation over the last decade. This is Part 1 of a 2-part blog post with this Part 1 providing:
Introduction - a one-decade look-back at labor force and jobs
Review - declining labor force participation
Summary - reduced workforce by the numbers
Note: All data used for this post is from the U.S. Bureau of Labor Statistics (BLS), based on monthly records extending back over this past decade.
A One-Decade Lookback @ Labor Force & Jobs
In January 2012, the U.S. had a total labor force of over 154 million with total seasonally adjusted employment of 141-142 million. Just over a decade later, as of August 2022 the nation’s labor force had increased to nearly 165 million with 159 million employed.
Looks like great progress. Well, not quite. We all know something is amiss. So get ready for a quick deep dive into the numbers.
What we see is that declining labor force participation has been an emerging trend going back over at least the last decade. And that the pandemic together with incomplete workforce recovery served to accelerate and intensify a now readily apparent shortage.
As shown by the following graph, despite the sharp but temporary downturn of the 2020-21 pandemic, America’s labor force is now 6% above 2012 levels and employment an even healthier 12-13% above pre-pandemic levels. The concern is with a decline in labor force participation which has been reduced from from as much as 63.8% to 62.4% of the civilian population age 16+ (as of August 2022).
Source: U.S. Bureau of Labor Statistics (BLS).
Monthly employment and labor force data for persons age 16+ is seasonally adjusted.
From 2012 - February 2020, employment across the U.S. had increased by 11.5%, nearly double the 6.4% increase in available labor force over the same time period. Existing slack was removed from the labor force as unemployment was reduced from 8.3% in January 2012 to a below normalized rate of 3.5% as of February 2020 (just prior to intrusion of the pandemic).
What’s remarkable about the 2020-21 pandemic is the exacerbating effect that temporary layoffs had on the labor force. From March - April 2022, over 25.5 million jobs were cut from employer payrolls. And about 8.2 million Americans exited the labor force, at least temporarily not seeking work. In effect, nearly one-third of massive pandemic layoffs were accompanied by persons leaving the labor force altogether.
With initial recovery in the summer of 2020, a good portion of these jobs were recovered quickly — with the U.S. back to full job recovery (to pre-pandemic employment) as of late summer 2022.
However, labor force recovery has continued to lag well behind job growth. Over the full time frame from January 2012 to August 2022, U.S. employment has increased by 12.8%, still about double the 6.6% increase in labor force. What’s particularly notable is the pattern of the recovery from April 2020 - August 2022 — with available labor force up by 5.3% versus an employment gain (or recovery) of 17.6% (meaning an even wider gap between workforce supply and demand)..
Re-entry of discouraged or marginalized workers occurred more slowly — lagging well behind employment growth. This has led to current low unemployment rates and to increased competition for an increasingly constrained labor pool — especially among lower-paid service workers.
Declining Labor Force Participation
So, what’s the worry?
As illustrated by the graph below, the concern is with the short and potentially longer-term effects of a decline in labor force participation which has eroded, starting slowly then abruptly, over about the last 10 years.
Source: U.S. Bureau of Labor Statistics (BLS).
Participation rates as a % of civilian population age 16+ are seasonally adjusted.
After peaking at a decade high 63.8% in October 2012, labor force participation rates began to trend downward — dropping to a pre-pandemic low of 62.3% as of September 2015. Participation rates then edged upward (somewhat erratically) to a new peak of 63.4% in February 2020.
Employment and labor force both crashed in the following two months. As the COVID pandemic took hold, America’s labor force participation cratered to 60.2% of the adult population by April 2020.
As employment recovered over the summer of 2020 and then more slowly thereafter, a portion of those who had dropped out of the workforce re-entered. But with not nearly the level of work attachment as the nation was accustomed to pre-pandemic.
As of August 2022, labor force participation has now reached a post-pandemic high of 62.4%. However, this is still well below the pre-pandemic high of 63.8%. And while a 1.4% point difference between the high and low participation rate may seem relatively trivial, this difference equates to a cumulative loss of 2.3 million workers over this approximate 10-year period.
It’s increasingly questionable as to whether workforce participation ever get backs to prior the strong levels of a decade back. This appears to be for two primary reasons:
Retirements of aging baby-boomers,
coupled withSome declining attachment of younger age adults to work
(with seemingly multiple explanations)
Reduced Workforce by the Numbers
I’ll come back to more detailed discussion of reasons for declining labor force participation in Part 2 of this blog post. We’ll dive even deeper into the numbers looking at:
State-by-state experience
Labor force participation by worker age and sex
Variations by race and ethnicity
Children at home
I close this Part 1 post with two quick summary observations — by the numbers. First, from 2012 up to the pandemic, labor force participation across America experienced some overall slow erosion — with at least 800,000 fewer Americans in the workforce at the start of the pandemic than in 2012. So, the beginnings of de-attachment for some workers has been in the works for some time.
Second, reduced labor force participation accelerated during the pandemic. Even with some recovery through to this August, America’s workforce has been reduced by another 1.5 million. In effect, the life and livelihood altering pandemic appears to have accelerated and intensified a trend already underway.
The net result is that, today, there are about 2.3 million fewer Americans either working or looking for work than a decade ago.
Where do we go from here? Look for a Part 2 installment - now available (click here to view).
To receive periodic blog posts,
simply email me at ehovee@edhovee.com
and say “Subscribe”
