Today’s jobs report, while overall very strong, showed a slight tick down in the labour force participation rate, from 62.8% last month to 62.7% this month. It’s now at the lowest rate since 1978:
Why the participation rate has fallen so much is one of the most hotly debated questions in economics. On the one hand, America is ageing, and the baby boomers are beginning to retire. That leads to a natural demographic decline in the participation rate.
On the other hand, the US is coming out of the worst recession it has faced in decades, and the participation rate dropped much more sharply since 2008. The cyclical effects from the recession may also be a big factor in the declining participation rate.