What Does Labor Force Participation Tell Us?

Start Here: Two Headlines

Imagine reading these two headlines in the same week in 2026:

WATCH Labor Force Participation (Marginal Revolution University)

Define It: Working or Looking

1 Three groups, one more time

The reading “What Does the Unemployment Rate Tell Us?” sorted everyone 16 and older, outside the military and institutions such as prisons, into three groups: employed, unemployed, and not in the labor force. The labor force is the first two groups together: people who are working or actively looking for work.

The labor force participation rate is the share of that whole population in the labor force. The unemployment rate asks, of the people in the labor force, what share can’t find work. The participation rate asks a different question: what share of adults is in the labor force at all?

2 Three ways to measure work

• The participation rate. The share of adults working or looking for work. October 2026: 61.9 percent.
• The employment-population ratio. The share of adults who are working. October 2026: 59.3 percent. It falls if people lose jobs or if people leave the labor force, so it captures both unemployment and participation in one number.
• Prime-age versions. The same measures for people ages 25 to 54, after most people finish school and before most retire. Looking only at this group strips out most of the effect of an aging population, which is why many economists watch it closely.

Measure It: The Long View

3 Up, then down

In the 1950s, about 59 percent of adults were in the labor force. The rate climbed for the next four decades and peaked at 67.3 percent in early 2000. It has drifted down since, to 61.9 percent today. Under the overall number, men and women moved in opposite directions. San Francisco Fed economists Andreas Hornstein, Marianna Kudlyak, Greeshma Avaradi, and Taerin Kim estimate that from 1976 to 2024, men’s trend participation fell 10.1 percentage points while women’s rose 8.2 points. Population aging pushed each down by about 4 points.

4 Who’s on the team, not how hard they play

Picture a basketball team that keeps the same players for ten years. The team’s average age rises by ten years, even though no player did anything different. Averages can change because of who is in the group, not because of what any one person does. Economists call this a composition effect.

The same thing is happening to participation. The baby boom generation is retiring, and people 65 and older make up a growing share of adults. Alexander Bick of the St. Louis Fed compared June 2019 with June 2026. The overall participation rate fell 1.5 percentage points, but the shift toward older age groups alone subtracted 1.7 points. Within age groups, participation actually rose on net. The overall rate fell even though, age group by age group, Americans were slightly more likely to be working or looking.

Bick also took apart the sharp drop in the first half of 2026:

The largest piece was not a change in anyone’s behavior. Each January, the BLS updates its survey to match new Census Bureau population estimates. In 2026, that update alone lowered the participation rate by about a third of a percentage point overnight. Like the payroll revisions in the unemployment reading, some “news” is really a statistical correction.

5 Who’s in and who’s out

Participation varies a lot from group to group:

South Carolina’s overall rate is below the national rate. Among people in their prime working years, the picture is better. The South Carolina Department of Employment and Workforce reports that the state’s prime-age rate rose from 81.1 percent in 2024 to 82.7 percent in 2025, higher than in any other state in the Southeast. The Hamilton Project’s labor market tracker lets you explore participation by age, sex, education, race, disability, and more.

Explain It: Why People Are Out

6 School, retirement, caregiving, and health

Most people outside the labor force are where they expect to be: in school, retired, or caring for family. Young people participate less than they used to, but a Hamilton Project study by Lauren Bauer, Emily Moss, Ryan Nunn, and Jay Shambaugh found that “youth today are not disengaged.” Instead, the decline “primarily reflect[s] a long-term but accelerating shift toward schooling.” Retirement is the largest reason overall, and it is growing as the population ages. Disability and illness keep others out. In September 2026, 24.7 percent of people with a disability were in the labor force, compared with 67.5 percent of people without one.

Not everyone outside the labor force has given up on work. In October 2026, 6.0 million people not in the labor force said they wanted a job. Of those, 448,000 were discouraged workers who had stopped looking because they believed no jobs were available for them.

7 Prime-age men: a long decline, a recent recovery

In 1954, 98 percent of men ages 25 to 54 were in the labor force. By 2016, the figure had fallen to 88 percent. A 2016 report by the President’s Council of Economic Advisers called the decline “particularly troubling since workers at this age are at their most productive.” The economist Nicholas Eberstadt of the American Enterprise Institute described it as “a quiet, continuing crisis: Depression-era work rates for American men of ‘prime working age.’”

The story has changed since then. A Hamilton Project analysis by Aviva Aron-Dine, Lauren Bauer, and Eileen Powell found that after the pandemic, prime-age men’s participation rose to 89.9 percent, the highest since 2009. It was 89.2 percent in May 2025. Unlike after the Great Recession, men fully recovered. The long-run decline is still real, though, and it is sharpest for younger men. At age 25, 84.0 percent of men born in the late 1990s were in the labor force, compared with 93.0 percent of men born 45 years earlier. Part of that gap is more time in school. Leila Bengali and Evgeniya Duzhak of the San Francisco Fed found that schooling explains about a third of the gap at younger ages, but virtually none of it by age 42.

When asked in 2022 why they were out of the labor force, prime-age men gave these reasons:

Why did prime-age men’s participation fall? Economists have offered three kinds of answers:

• Pushed out: fewer good jobs. Trade and automation reduced demand for men without college degrees, especially in factory work. In a review of the evidence, Katharine Abraham and Melissa Kearney concluded that import competition from China and the spread of robots “are the most important drivers” among the factors researchers can measure. The Council of Economic Advisers report also pointed to “a reduction in the demand for less skilled labor.”
• Pulled out: other options. Scott Winship of the Mercatus Center argued that the evidence shows “no significant drop in demand, but rather a change in the labor supply driven by declining interest in work relative to other options,” including disability benefits. Mark Aguiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst found that better video games and recreational computing lowered young men’s work hours by about 2 percent, “much of their work hours decline compared to older men’s.”
• Held back: health and records. Alan Krueger found that “nearly half of prime age men who are not in the labor force take pain medication on a daily basis.” A BLS study of men in their early 30s found that 20.6 percent of those who had not worked in the past year had been incarcerated in the year before the interview.

No single cause explains the decline. Abraham and Kearney found that disability programs, higher minimum wages, and more people with prison records also played smaller roles. They left several possible causes, including leisure technology, opioids, and child care, as questions the evidence can’t yet settle.

8 Women: a quiet revolution and a plateau

Claudia Goldin won the 2023 Nobel Prize “for having advanced our understanding of women’s labour market outcomes.” She called the transformation of women’s work “the quiet revolution.” Women did not just take jobs. They began planning for long careers and investing in the training those careers required. The birth control pill played a part. Martha Bailey found that legal access to the pill before age 21 “increased the number of women in the paid labor force, and raised the number of annual hours worked.” The pill lowered the risk that an unplanned pregnancy would derail years of training.

Then the rise stopped. The Pew Research Center reports that women’s participation “leveled off around 1990 and has stayed remarkably stable since then.” Prime-age women did set a record of 78.4 percent in August 2024. Lara Loewenstein of the Cleveland Fed points to three features of U.S. policy that can discourage a second earner, usually the wife, from working: joint income taxes for married couples, which can mean a higher tax rate on the second earner’s pay; Social Security spousal and survivor benefits; and the cost of child care.

WATCH Women Working: What’s the Pill Got to Do With It? (Marginal Revolution University)

9 Why it matters for everyone

A country’s output depends on how many people work, how many hours they work, and how much they produce per hour. When participation falls, more of the load falls on productivity, the engine described in “What Makes Economies Grow?”

The labor force is now growing very slowly. Alison Felix of the Kansas City Fed concludes that “the labor force is currently near its peak.” The Congressional Budget Office projects that participation will fall from 62.5 percent in 2025 to 61.9 percent in 2036, as more of the baby boom generation and Generation X retire. Fewer workers per retiree means fewer people paying into Social Security and Medicare for each person drawing benefits.

Immigration enters this story through simple arithmetic. Immigrants tend to be younger, and foreign-born men participate at higher rates than U.S.-born men, 77.3 percent versus 65.9 percent in 2024, according to Santiago Pinto of the Richmond Fed. As net immigration slowed in 2026, Federal Reserve economists estimated that the number of new jobs needed each month to keep unemployment steady could fall below 10,000. Whether to require work as a condition for public benefits is a separate debate, for a future reading.

WATCH Taxing Work (Marginal Revolution University)

What Economics Adds

LISTEN The Problems of Boys and Men in Today’s America (with Richard Reeves) on EconTalk, hosted by Russ Roberts; and Men Without Work: Is a Hidden Trend Fueling American Populism? with Nicholas Eberstadt on Terms of Engagement from the Harvard Ash Center, both with transcripts

Key Terms in Plain Words

Labor force

Everyone 16 and older who is working or actively looking for work.

Participation rate

The labor force as a share of the population 16 and older.

Employment-population ratio

The share of the population 16 and older that is working.

Prime age

Ages 25 to 54, after most people finish school and before most retire.

Not in the labor force

Neither working nor looking: students, retirees, caregivers, and others.

Discouraged worker

Wants a job but stopped looking because they believe none is available.

Composition effect

A change in an average caused by a change in who is in the group.

Population controls

Yearly updates that match survey totals to new Census population estimates.

Labor demand

How many workers employers want to hire at a given wage.

Labor supply

How many people want to work at a given wage.

Secondary earner

In a two-earner household, the person who earns less, often taxed at the household’s rate.

Breakeven job growth

New jobs needed each month to keep the unemployment rate steady.