The US labor force has shrunk by more than 1 million people over the past year, and the participation rate has dropped to 61.4%, its lowest level since February 2021. Economists point to retiring baby boomers, tighter immigration rules, and discouraged job seekers as the main drivers.
The US labor-force participation rate fell to 61.4% in July, the Bureau of Labor Statistics said Friday — the lowest reading since February 2021. The workforce itself has shrunk by over 1 million people in the past year. It fell to 169.1 million, down from 170.4 million last July, with most of that decline happening in the last couple of months.
Retirements and tighter immigration curb the workforce
The clearest driver is demographic. The youngest baby boomers are now in their early 60s, and their continuing exit from the workforce is the steadiest force pushing participation lower, said Cory Stahle, senior economist at the Indeed Hiring Lab. According to MarketWatch: "That's the clear, sustained decline," he said.
A declining birth rate adds to the squeeze, as does tighter immigration policy. Matthew Martin, senior US economist at Oxford Economics, pointed to stricter immigration rules and increased enforcement during President Donald Trump's second term. With older workers leaving in large numbers, he said, there aren't enough younger workers to fill their spots.
Discouraged job seekers add to the drag
A sluggish hiring market is compounding the demographic shift. The July jobs report showed it took unemployed Americans almost 25 weeks on average to find their next job, and roughly one-quarter of unemployed job seekers have been searching for at least half a year.
The BLS counts someone as looking for work only if they applied for jobs within the past four weeks, so long, fruitless job hunts can push people out of the official labor pool. There were 503,000 "discouraged workers" in July, up from nearly 460,000 a year earlier — people who didn't look for work in the past month, often because they believed none was available.
Stahle said it's possible some of those demoralized job seekers are simply giving up on their search altogether, rather than pausing it.
Source: MarketWatch
Trading involves risk.
Risk Disclaimer
