Page 6 - ISO April 2023

INVESTMENT STRATEGY QUARTERLY

Labour Force Participation: Where Did the

Workers Go?

Eugenio J. Alemán, PhD, Chief Economist, Raymond James
Giampiero Fuentes, Economist, Raymond James

UK editors note: Whilst necessarily US-centric we repro-
duce this interesting analysis as many of the themes As of August 2021, there were slightly over 2.4
contained within pertain also to the UK and other devel- million excess retirements due to COVID-19,
oped global economies more generally. which is more than half of the 4.2 million people
who left the labour force from the beginning of
Labour force participation refers to the percentage of the the pandemic to the second quarter of 2021.
population who are either employed or actively seeking
employment. Overall, labour force participation has is, higher real wages incentivised workers to join the work-
declined in the US over the past several decades. force and brought labour force participation up slightly.
Labour force participation for men has been steadily The COVID-19 pandemic caused a significant drop in labour
declining since the 1960s, and only the staggering number force participation, but the US labour force is still 0.8%
of women joining the workforce has allowed labour force lower than what it was pre-pandemic, so where did all
participation to increase over the years. Labour force par- these people go?
ticipation peaked at 67.3% in 2000, when women’s
There are many hypotheses surrounding the whereabouts of
participation also peaked, and steadily declined until 2015,
the missing workers, and it’s unlikely that economists will have
when real wages and salaries seemed to have worked their a more precise answer for years to come. However, we believe
magic to bring more individuals into the labour force. That that most of these missing workers are a combination of early

6 Endnotes are listed on Page 20.