Labor force and macroeconomic projections overview and highlights, 2023–33

Each year, the U.S. Bureau of Labor Statistics (BLS) publishes projections of labor force participation rates and growth rates for the population and the labor force for the next 10 years. Despite fluctuations in labor force participation over the past 2 years, growth rates for both the population and the labor force are projected to slow over the 2023–33 projections decade. Over this period, the labor force is projected to grow 0.4 percent annually, while the population is projected to grow 0.6 percent annually. This continued slowdown is similar to historical trends since the turn of the century. (See chart 1.) As the labor force grows more slowly than the population, there will be a continued decline in the labor force participation rate, from 62.6 percent in 2023 to a projected 61.2 percent in 2033.¹ (For brevity, the labor force participation rate will be referred to as the participation rate throughout this article.)

Because the labor force is a subset of population, growth rates for the two tend not to differ substantially over time. If they did, there would be abrupt swings in the participation rate, because the participation rate is calculated by dividing the labor force by the population. Although a dramatic swing occurred in 2020 as a result of the COVID-19 pandemic, it was short lived. For the most part, particularly over longer timeframes, the participation rate changes slowly. (See chart 2.)

Changes to long term trends—often referred to as structural changes—within either the population or the labor force have an outsized effect on the participation rate. Typically, structural changes do not affect all parts of the population or labor force equally. For this reason, it is insightful to analyze individual demographic groups to see the changes that affect the overall population, labor force, and participation rate. BLS projects statistics for detailed demographic groups by age, sex, race, and ethnicity. The following characteristics for these detailed demographic groups will be highlighted throughout this article: their history, structural changes, 2033 projections, and their noteworthy effects on the overall population, labor force, and participation rates.

Methodology

Labor force projections consist of three components: population, labor force participation rates, and the resulting labor force. Each component is modeled at the detailed level by age, sex, and race or ethnicity. The resulting detailed levels can then be aggregated to larger categories (e.g., by race or sex) and, ultimately, to the total. These projections are consistent with the Current Population Survey (CPS) civilian noninstitutional population.² The definition of the civilian noninstitutional population differs from other definitions, such as the resident population that the U.S. Census Bureau publishes. BLS projections exclude those who live in institutions, are on active duty in the Armed Forces, or are under the age of 16.

The projections for labor force participation rates are modeled by using historical trends. Population projections are derived from the 2023 U.S. Census Bureau population projections.³ However, because the U.S. Census Bureau projections are for the resident population, BLS benchmarks these resident population projections to the most recent (2023) annual population estimates available from the CPS. Labor force projections are obtained by multiplying each detailed demographic group’s population by its participation rate.

Once labor force projections are developed, they are supplied to the aggregate economy (macroeconomic) model. BLS develops macroeconomic projections with the U.S. Macro Model (MAUS), licensed from S&P Global Market Intelligence.⁴ It is assumed in the MAUS model that full employment will occur in the target year of 2033. Data for energy prices come from the U.S. Energy Information Administration, and BLS determines other critical variables—most notably the labor force—and supplies them to the MAUS model exogenously.⁵ The MAUS model then projects economic aggregates, including total employment, output, productivity, prices, interest rates, and many other variables for the U.S. economy. These variables—most importantly nonfarm payroll employment and the components of gross domestic product (GDP)—serve as constraints for industry output and employment projections.

Overview of labor force projections

BLS projects growth of both the labor force and the population to continue to slow over the coming decade. These changes are a continuation of a general long-term decline of labor force and population growth rates. (See chart 1.) The population is projected to grow at 0.6 percent annually, to 283.3 million in 2033, while the labor force is projected to grow at a 0.4-percent annual rate, to 173.3 million in 2033.

The main factors that affect population growth are immigration and fertility rates. Immigration levels have increased over the past couple of years. Based on U.S. Census Bureau projections, immigration levels over the projections period are expected to remain high relative to those observed during the COVID-19 pandemic (2020–21), but mostly lower than the levels seen during the decade preceding the pandemic.⁶ (See chart 3.) Fertility rates have been mostly declining since 2007 and are now well below the replacement rate of 2.1 births per woman. The U.S. Centers for Disease Control and Prevention found that the total fertility rate for the Unites States in 2023 was 1.6 births per woman.⁷ Other factors can also affect population, such as women waiting longer until having children and changes in life expectancy.

Because the labor force is a subset of the population, the trends that affect population growth also tend to affect labor force growth. However, some factors that affect the labor force do not affect the population. The largest driver is aging. The 25- to 54-year-old age group is commonly referred to as the prime-working-age (hereafter, prime-age) group, because people in that group are more likely to be in the labor force. As individuals age beyond 55 years, their propensity to stay in the labor force decreases. Other drivers of labor force change include offshoring, automation, and other technological changes.

Aging and its effect on the labor force and the population

By itself, aging does not affect the overall population. Rather, it is the lack of growth in the younger demographic groups that is causing the slowdown in population. As the baby boom generation has moved into the 55-and-older age groups, these groups have seen their growth increase dramatically. In 2023, this was particularly true for those who were ages 65 to 74. As baby boomers continue to age, the 75-and-older age group will drive growth through 2033. Growth of the 75-and-older age group is projected to account for more than two-thirds of all population growth over the 2023–33 projections period. This is noteworthy because the 75-and-older age group accounts for only 9 percent of the population in 2023. Chart 4 shows this older age group’s contribution to changes in the overall population.⁸

As individuals age, they tend to drop out of the workforce. For this reason, the increase in the population of people in the 75-and-older age group has a limited impact on the overall labor force. Although the 75-and-older age group is projected to account for more than two-thirds of population growth, it will account for one-fourth of total labor force growth over the projections period.⁹

The 75-and-older age group is projected to account for 2.1 percent of the overall labor force in 2033, a percentage much larger than the 0.6 percent in 2003, but still relatively small. Charts 4 and 5 show differences in age-group contributions to the population and the labor force. This dynamic of an aging population explains why the overall labor force is projected to grow more slowly than the population as the majority of the growth in population is in groups that tend not to work.

The discrepancy between, on the one hand, the effect of aging on the overall population and, on the other hand, its more limited effect on the labor force influences the participation rate and is projected to continue doing so. Although there are other trends contributing to the participation-rate decrease (see sections for the youth and prime-age groups), aging is the primary driver. The overall participation rate peaked in the late 1990s and 2000, at 67.1 percent. Since then, the participation rate has continued a downward trend, dropping to 62.6 percent in 2023. This trend closely aligns with the aging of the baby boomers. As the population continues to age through 2033, BLS projects the overall participation rate to fall to 61.2 percent in 2033. (See chart 2.)

By 2033, baby boomers will be age 69 and older, and the succeeding generation (associated with lower birth rates at the time of their birth) will move into the 55- to 64-year-old age group. This trend will shift the composition of the 55-and-older population toward the older age subcategories. Also, this will cause the participation rate for the 55-and-older age group to decline despite the projected increase in the participation rate for all of the more detailed age groups (ages 55 to 64, 65 to 74, and 75 and older). (See table 1.)

In 2023, the 75-and-older age group made up 24 percent of the 55-and-older population. The 75-and-older age group is projected to increase to 32 percent in 2033. This projected trend contrasts with that for the 55- to 64-year-old age group, whose contribution is projected to fall from 42 percent in 2023 to 35 percent in 2033. This change of contributions to the 55-and-older group would not matter if the groups had similar participation rates. However, the participation rates for the two groups differ dramatically. The participation rate for the 55- to 64-year-old age group in 2033 is projected to be 69.1 percent, which will be weighted less heavily. (See chart 6.) This contrasts with the 75-and-older age group’s 2033 projected participation rate of 10.1 percent, which will be weighted more heavily.

Although the participation rates differ across older age groups, they have all been trending upward over the past three decades. (See charts 6, 7, and 8.) Pension reform and a reduction of nonsocial security programs are some explanations for this trend.¹⁰ Although COVID-19 induced a decline in the labor force participation rate around 2021, the longer term upward trend is projected to continue. The rate of change for the 75-and-older age group is projected to be the largest, rising from 8.3 percent in 2023 to 10.1 percent in 2033.¹¹

Youth’s declining participation rate

Although aging is the primary driver of the decline in the overall participation rate, it is not the only factor. Other demographic groups are projected to see their participation rates decrease. This includes the youngest groups, those ages 16 to 17, 18 to 19, and 20 to 24. The participation rates for these groups were lower in 2023 than they were during the 1990s and much of the 2000s. College enrollment, as a percentage of the population, has been declining over the past couple of decades.¹² This suggests that individuals pursuing educational opportunities instead of entering the labor force did not drive the increase in participation rates in the 1990s and 2000s. (The reverse dynamic, that of falling college enrollment leading to an increase in participation rates, also did not occur.) Instead, students were more likely to simultaneously be in the labor force and attend college in the 1990s and 2000s than they are today. Participation rates of those in college (for 2- and 4-year college students) have been declining since  around the year 2000.¹³

Over the 2023–33 projections period, BLS projects the labor force participation rate to decline from 26.5 percent to 24.1 percent for the 16- to 17-year-old age group, from 49.1 percent to 45.7 percent for the 18- to 19-year-old age group, and from 71.3 percent to 69.1 percent for the 20- to 24-year-old age group. (See chart 9.)

Another noteworthy trend among the youngest age groups is that their population growth is projected to be negative over the 2023–33 projections period. This trend is due to the decreased fertility rate noted previously. The lower fertility rate resulted in less births over the 2010s, particularly in the latter half of the decade.¹⁴ Individual’s born in the 2010s will make up the 16- to 17-year-old, 18- to 19-year-old, and 20- to 24-year-old age groups in 2033. The population of the 16- to 17-year-old age group is projected to decline the most, at 0.7 percent annually. The population of the 18- to 19-year-old age group is projected to decline 0.3 percent annually, and that of the 20- to 24-year-old age group is projected to decline 0.5 percent annually.¹⁵

Prime-age groups

While youth participation rates are projected to continue to decline, prime-age participation rates are projected to be relatively stable. People in the 25- to 54-year-old age group, whose members are most likely to be working, are referred to as the prime-age group. The men’s prime-age participation rate is projected to decline, while the women’s participation rate is projected to increase slightly; these changes are continuations of long-term trends. (See chart 10.)

The men’s prime-age participation rate has been trending down since the 1950s. The decline has never been dramatic, just a slow and steady downward trend. During the 20th century, the women’s prime-age participation rate increased, peaking in 1999. After the peak, the women’s rate reached a low of 73.7 in 2015, before rebounding to a new high of 77.4 in 2023.¹⁶

Some of the decline over the 2000s, especially for men, is potentially attributable to declines in manufacturing jobs.¹⁷ This is due to increased globalization, particularly increased imports from China, and the penetration of robots into the labor market.¹⁸ BLS projects the men’s prime-age participation rate to decline from 89.1 percent in 2023 to 87.4 percent in 2033.

The women’s prime-age participation rate began reversing its downward trend in 2016, surpassing the prior 1999 peak in 2023. A trend affecting the women’s participation rate is the growth in certain female-dominated service sectors of the economy, such as healthcare and education.¹⁹ BLS projects the women’s prime-age participation rate to continue increasing, from 77.4 percent in 2023 to 77.8 percent in 2033.

Labor force composition by ethnicity

The percent share of Hispanics in the total population has been trending upward for the past couple of decades and is projected to continue increasing. From the 2000s onward, this population growth was primarily driven by Hispanics born in the United States rather than those who immigrated here. Prior to the 2000s, Hispanic growth was driven mainly by immigration.²⁰ The fertility rates of Hispanics are higher than those of other demographic groups.²¹ This difference results in the percentage of Hispanics continuing to increase over the 2023–33 projections decade. Hispanics are projected to account for 20.2 percent of the population in 2033, compared with 17.8 percent in 2023. The trend is more pronounced for the labor force, with Hispanics being projected to account for 22.0 percent of the labor force in 2033, compared with 19.0 percent in 2023. Chart 11 shows a more thorough historical comparison.

Overview of macroeconomic and aggregate economy projections

The slow labor force growth projected through the 2023–33 decade influences the U.S. economic output projections. GDP growth has been slower over the past two decades relative to the 1980s and 1990s, which reflects the slowdown in labor force growth over the same period. This trend is projected to continue, with BLS projecting GDP to grow 1.9 percent annually over the 2023–33 projections period. (See chart 12.)

GDP growth is attributable to personal consumption expenditures (PCE), investment, net exports, and government spending. Typically, PCE accounts for the majority of GDP growth, and investment accounts for a smaller amount. Government spending and net exports usually account for a limited amount of growth, although government spending often spikes during periods of reduced demand, such as recessions, because of automatic stabilizers and fiscal stimulus. Chart 13 shows historical and projected GDP growth broken out by contribution.

From 2023 to 2033, BLS projects PCE to account for 1.5 percentage points of GDP growth, investment to account for 0.4 percentage point, net exports to account for negative 0.1 percentage point, and government to account for 0.1 percentage point. This projected GDP growth is similar to historical trends, though notably different from 2023 GDP growth.

In 2023, government and net exports contributed substantially to growth whereas investment contributed negatively. Net exports were still negative in 2023, but the trade deficit shrunk after 2022, which resulted in a positive contribution to overall growth. Additionally, government spending had a greater-than-usual contribution to growth. This was driven by both state spending (a 0.4-percentage-point contribution) and federal spending (a 0.3-percentage-point contribution). From 2023 through 2033, BLS projects that growth trends will return to the historical norm, with PCE and investment driving growth.

Employment, unemployment, and the nonaccelerating inflation rate of unemployment

Another important part of BLS macro projections is employment. Employment links the labor force to the economy’s output. Employment is a primary input into GDP growth. Capital and total factor productivity are others. Therefore, as the labor force and employment increases, GDP tends to increase as well.

Not everyone in the labor force is employed. The labor force consists of those who are working or actively looking for work; those not working but looking for work are unemployed. Although unemployment fluctuates over the business cycle, it tends to return to a structural level, known as the nonaccelerating rate of unemployment (NAIRU), when the economy is at full capacity.²² Chart 14 shows historical and projected unemployment rates and NAIRU rates.

Historically, the unemployment rate is more likely to be above than below the NAIRU. However, in 2022 and 2023, the rate was below the NAIRU, suggesting the economy was running above capacity. The section on sensitivity risk analysis details how the projections would change if the current NAIRU assumptions were changed. Since BLS projections assume full employment, BLS projects the unemployment rate to rise over the 2023 to 2033 projections period, from 3.6 percent in 2023 to 4.2 percent in 2033. At this point, in 2033, the unemployment rate will equal the NAIRU.

This increase in the unemployment rate means that employment is projected to grow slightly slower than the labor force. Over the 2023 through 2033 projections period, civilian employment is projected to grow 0.3 percent annually, compared with 0.4 percent annually for the labor force.

Productivity

In addition to employment as a driver of growth, labor productivity—measured as output divided by hours worked—influences GDP growth. Labor productivity is attributable to capital deepening and other factors that are more difficult to measure. Capital deepening refers to an increase in the ratio of capital to labor. Greater investment increases this ratio, although capital naturally depreciates over time. The aforementioned 0.4 annual percentage point of GDP growth that investment is projected to be responsible for will drive this capital deepening. Additional factors beyond capital deepening are referred to as total factor productivity (TFP). These include (but are not limited to) technological improvements, increases in the education or quality of the workforce, improvements in management practices, and economies of scale.

Overall productivity is projected to grow 1.7 percent annually from 2023 through 2033. This growth is in line with much of history, although higher than the preceding decade—productivity grew 1.4 percent from 2013 through 2023. Typically, investment contributes to productivity more than does TFP, although there have been historical exceptions. Over the 2023–33 decade, BLS projects TFP and investment to have similar contributions to productivity, though TFP contributes slightly more. (See chart 15.)

Inflation and interest rates

After many years of inflation remaining at or near the Federal Reserve’s (hereafter, the Fed) target rate of 2 percent, inflation spiked in 2022 and remained elevated in 2023, when the Consumer Price Index (CPI) increased 4.1 percent and the GDP Price Index increased 3.6 percent.

In an effort to rein in this inflation, the Fed has dramatically increased the federal funds rate to drive interest rates higher over the past couple of years. At the start of 2022, the federal funds rate was in the range of 0.00 to 0.25 percent. In mid-2024, this range had risen to 5.25–5.50 percent. BLS projects inflation to return to long-run patterns through 2033, with both the CPI and the GDP Price Index projected to increase 2.2 percent annually over the projections period.

Sensitivity and risk analysis

It can be a useful exercise to question some of the assumptions that go into BLS projections. What if the NAIRU is lower than currently estimated? What if immigration levels end up higher than projected? BLS has run two sensitivity analyses. The first analysis assumes the NAIRU to be lower, in the range of the 2023 unemployment rate. The second analysis uses the U.S. Census Bureau high-immigration scenario rather than the base scenario.

Lower NAIRU

The NAIRU is estimated by the Congressional Budget Office (CBO). As additional historical data become available, the CBO often changes its historical estimates of the NAIRU. Changes are typically a couple of tenths of a percentage point, although they have been as large as one half of a percentage point.²³ Unemployment has been below the NAIRU since 2022, and inflation has been elevated during this period. Inflation was lower in 2018 and 2019, when unemployment was also below the NAIRU. For this sensitivity analysis, BLS modeled projections by assuming a NAIRU of 3.7 percent in 2033. This value is 0.5 percentage point below the 2033 CBO estimate that was used in the BLS base projections. The 3.7-percent NAIRU is slightly higher than the unemployment rate in 2022 and 2023. Population growth remained the same in this scenario.

Because BLS projects to full employment, a lower NAIRU results in a lower unemployment rate and correspondingly higher employment in the 2033 target year. Therefore, the changed assumption resulted in employment growing 0.1 percentage point faster over the 2023–33 projections period, which would equal approximately 1 million additionally employed people. Table 2 shows the exact changes to civilian and nonagricultural payroll employment levels.

Higher immigration

In addition to the main population projection series, the U.S. Census Bureau also projects three alternative series based on high, low, and zero net immigration assumptions.²⁴ Net immigration projections are similar between the U.S. Census Bureau high-immigration projections and those the CBO projected in its 2024 Demographic Outlook.²⁵ For this reason, this sensitivity analysis considers the high-immigration assumption rather than the other alternative scenarios.

Under the high-immigration scenario, annual growth in the civilian noninstitutional population is projected to be 0.2 percentage point higher than it is in the BLS base projections. This difference results in the population growing by an additional 6.4 million and employment growing by 3.8 million (civilian household) or 4.0 million (nonagricultural payroll). Table 2 shows the specific population and employment estimates as well as comparisons to the other scenarios.

Because BLS develops the macroeconomic projections to project employment, risks with the potential to dramatically change employment were focused on here. The base BLS macroeconomic projections yield a well-informed reasonable growth path for the economy over the projections period. However, these projections depend on underlying assumptions about the future that may turn out differently. Although risks remain in both directions, these sensitivity analyses provide a sense of potential upside risks to employment.

Conclusion

Labor force and employment growth rates are projected to continue to slow through the 2023–33 projections period because of continuing demographic trends, particularly the aging of the population. This shift in population dynamics also contributes to a projected continual decline of the nation’s overall labor force participation rate, with older individuals being less likely to work. A stalling participation rate for prime-age workers—driven by the men’s rate, which has been declining for decades—has also contributed to slower labor force growth. The prime-age participation rate is projected to decline further through 2033, continuing to be driven by the men’s rate. As employment growth slows, so does GDP growth. BLS projects GDP to grow 1.9 percent annually through 2033, which is lower than the 2.3 percent growth from 2013 to 2023.