SF Fed Economists On Drivers Of Prime Age Labor Participation

Well timed with Bostic’s remarks on the labor force, SF Fed economists have published a letter on drivers behind prime-age participation increases.

• “The labor force participation (LFP) rate for prime-age workers surged from early 2021 through early 2023, especially for women. This helped reduce the large shortfall of available workers relative to available jobs that emerged during the recovery from the pandemic.”
• “Analysis of state labor markets indicates that the cyclical response of prime-age LFP was much more pronounced during the two most recent business cycles than in prior ones. This state-level relationship weakened in 2023, however, suggesting that the cyclical gains in prime-age LFP are winding down.”
• Consistent with the latter, these gains have indeed slowed with the prime-age rate dropping back and then stalling at 83.2-83.3% in the four months of data since October (charts of which can be seen in the MNI Employment Insight).