MNI: US Labor Participation To Dip Another 1PP On Aging-SF Fed

A flagship measure of U.S. labor supply will keep falling over the coming decade as the population ages, San Francisco Federal Reserve researchers find in a paper released Monday.

The participation rate, the share of the working-age population that's employed or looking for a job, will fall another percentage point through 2032 according to the paper examining different demographic groups for cyclical and long-term trends. Even a percentage point decline makes a difference in a labor force of 167 million Americans, potentially slowing economic growth and boosting inflation.

Participation dropped from 63.3% to 60.1% when Covid struck and has only made a partial rebound to 62.6% as of July. That partial supply recovery contrasts with higher demand, with the unemployment rate falling to near-record lows.

The tight job market boosted the participation rate above the longer-term trend last year and over time population aging will dominate according to the paper by Andreas Hornstein, Marianna Kudlyak, Brigid Meisenbacher and David A. Ramachandran.

"Population aging looms large in this projection: we project the aggregate trend will decline as more of the population enters age groups with low participation rates," they wrote in the paper.