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What is the labor force participation rate?

The metric for measuring what percentage of the population is in work has been a useful tool in assessing the damage caused by the pandemic.

President Joe Biden walks on the South Lawn of the White House to board Marine One, in Washington.
Tom BrennerReuters

The Labor Force Participation Rate is an estimate of how many people can be classed as 'active' in a workforce.These are people who are currently in work or who are actively seeking a job.

It has been argued that this measure is a better assessment of unemployment, as it excludes those who are incapable of work and accounts for people who aren't looking for a job, something raw unemployment data doesn't do.

There are many factors for why participation rises and falls. New attitudes to women in the workplace provided some of the largest growth in the second half of the 20th century, as well as changing demographics. The US population is aging, and the Labor Participation data reflects this.

How is it worked out?

To work out the Participation Rate, you need to divide the number of people ages 16 and older who are employed or actively seeking employment, by the total civilian working-age population. Pretty simple really.

The figures for the US currently stand at 62.2 percent. During the first months of the pandemic, the number dropped from 63.4 percent to 61.4 percent. The lowest measure was 60.2 percent in April 2020.

Participation in the workforce steadily grew from the 1960s to 1990s, but multiple economic shocks since have stunted said growth. Workforce participation is 5 percentage points lower than it was at the turn of the millennium.

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What is the latest unemployment rate data?

As of the latest figures, the official US unemployment rate stands at 4 percent, much lower than the nearly 40 percent not employed based on the Labor Force Participation Rate metric. The disparity is so large as the standard employment rate measurement, known as U-3, ignores those who are not in the labor force. There are plenty more people without a job than 1 in 25.

The Department of Labor reported last month that initial unemployment claims climbed by 55,000 to 280,000 for the week ending on 15 January.

Clearly, this is nowhere near the numbers reached in the beginning of the pandemic, but is a significant increase compared to the low levels reached in late 2021. Late last year, the rate of first time claims for these benefits hit a historic low.