Labor force participation during recent labor market downturns

The longest postwar expansion in the Nation’s history ended when the economy entered a recession in March 2001. Subsequently, the labor force participation rate fell, with declines occurring among youths aged 16 to 24 and workers in the 25 to 54 years age group. These declines are in contrast to the labor market downturn of the early 1990s, during which the dropoff in labor force participation was much smaller.

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The sharpest decline in labor force participation between the first quarter of 2001 and the second quarter of 2003 occurred among persons aged 16 to 24. During this period the participation rate for this group fell by 3.6 percentage points, compared with a decline of 0.6 percentage point between the third quarter of 1990 and the third quarter of 1992.

Participation rates during the most recent labor market downturn also declined among both women (from 76.8 to 75.9 percent) and men (from 91.6 to 90.7 percent) aged 25 to 54. By comparison, during the early 1990s, the rate for women in that age group actually continued to rise, increasing from 74.0 to 74.7 percent, while the rate for men was little changed.

Partially offsetting the declines in participation among the other age groups, the labor force participation rate for individuals aged 55 and older rose by 2.8 percentage points over the most recent recession and the year and a half following. The rise in labor force participation rates among older workers may reflect several factors that affect work and retirement decisions such as changes to Social Security regulations, falling stock market prices, and declining interest rates.

These data are from the Current Population Survey (CPS). For more information, see Issues in Labor Statistics: September 2003 (PDF 111K), Summary 03-03.

Note: The National Bureau of Economic Research (NBER), the generally recognized arbiter of business cycle turning points, designated March 1991 as the trough of the recession that began in July 1990. Although this recession thus officially ended in March 1991, labor market conditions continued to be sluggish until late 1992. NBER designated March 2001 as the starting date of the most recent recession and November 2001 as the endpoint. Labor market conditions again remained sluggish well after the official trough of the recession. This article compares data for the quarter containing the NBER-designated peaks to the sixth quarter after the official NBER troughs.