Identifying Factors behind the Decline in the U.S. Labor Force Participation Rate

Abstract

The analysis in this paper finds that the dramatic decline in labor force participation during the Great Recession is more than explained by deteriorating labor market conditions (cyclical factors).Behavior adjusted over this time period to boost labor force participation so that it was higher in 2012 than would have been predicted by the model. Depending on the strength of the labor market going forward, we project anywhere from a further decline in the labor force participation rate of 0.8pp to an increase of 0.35pp by 2017.