94,333,000 Not In Labor Force; Labor Force Participation 62.8%

Published on August 5th, 2016

A waitress mops the floor at an open but empty Waffle House restaurant in Lancaster, Pa. in this Associated Press file photo.

By Susan Jones
August 5, 2016

94,333,000 Americans were not in the labor force in July, a slightly better showing than June’s 94,517,000; and the labor force participation rate improved slightly, increasing a tenth of a point to 62.8 percent from June’s 62.7 percent, the Labor Department's Bureau of Labor Statistics reported on Friday.

In September 2015, the labor force participation rate dropped to 62.4 percent, its lowest point since 1977.  The best it’s been since Barack Obama took office is 65.8 percent in February 2009, the month after Obama was sworn in amid a recession.

The labor force participation rate is the percentage of people in the civilian noninstitutional population, age 16 or older, who are either working or actively seeking work.

As noted by the Congressional Budget Office, the labor force participation rate reflects people’s decisions about the attractiveness of working or looking for work compared with alternatives such as attending school, caring for family members, or retiring.

In Friday’s report, BLS said the economy added 255,000 jobs in July, a better showing than analysts expected. That 255,000 compares with a revised 292,000 in June and a revised 24,000 in May.
The July unemployment rate held steady at 4.9 percent, as the number of unemployed persons dropped 13,000 to 7,770,000.  At the same time, the number of employed persons increased 420,000 to 151,517,000 in July.

In July, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, reached 253,620,000. Of those, 159,287,000 participated in the labor force by either holding a job or actively seeking one.

The 159,287,000 who participated in the labor force equaled 62.8% percent of the 253,620,000 civilian noninstitutional population.

Long-term Outlook

In its long-term budget outlook published in July, the Congressional Budget Office projected that the labor force participation rate will decline from about 63 percent in 2017 to around 58 percent in 2046.
Variations in the participation rates affect the federal budget by changing output and income and by changing the interest rates the federal government pays on public debt.

The CBO noted that its projected 58-percent rate in 2046 could be higher or lower for various reasons, including demographics, economic conditions, and social and technological developments, such as changes in the roles of men and women in the rearing of children or the introduction of a new medical technology that improves the health of the population, leading people to work longer, for example.

CBO concluded that if the labor force participation rate is 61 percent in 2046, the resulting higher gross domestic product would lead to more revenues, higher interest rates, smaller budget deficits, and less federal debt.

But if the labor force participation rate drops to 55 percent in 2046, the slower economic growth would result in larger budget deficits and more debt.

The CBO also projected that the labor force will grow by an average of 0.4 percent a year over the next 30 years, compared with 1.5 percent between 1966 and 2015.

Contributing factors include retiring baby boomers, declining birthrates, and declining participation in the labor force.

Less growth in the labor force means economic growth in the years ahead will be slower than it was in the past 50 years.

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