In 2013 both the national and statewide unemployment rates were declining – a positive economic sign. But the concern has been the labor force participation rate, which has been falling – particularly in certain age groups.

The labor force participation rate – the percentage of the adult population that is employed or actively looking for work – has been steadily declining since the late 1990s, both nationally and in Idaho. Idaho did see a strong jump in the rate during the mid-2000s expansion, and the state participation rate has remained at or above the national rate even during five percentage point slide over the past 15 years. The national annual average rate only declined 3.4 percentage points.

Male participation in the labor force exhibits a similar downward trend with a few differences. In Idaho, the 2012 annual average participation rate showed a small increase of six-tenths of a percentage point. Another difference between the total rate and that for men is the level of the decline. In both Idaho and the nation, the rate dropped 4.5 percent between 1999 and 2012. In Idaho, the decline in the male labor force participation rate was less than that for both genders while the males nationally had a more severe decline.

The decline in labor force participation for women in Idaho was more severe at 5.5 percentage points. The national decline was less than half that at 2.3 percentage points. In fact the labor force participation rate for Idaho women dropped below the national participation rate for women in 2008 and remained there into 2012.

Participation rates among different age groups shows the most telling differences. While most age groups showed moderate decline in labor force participation, two had exceptional changes. Idaho’s 16-to-19 year olds participated in the labor force at a rate of almost 61 percent in 1999. This was nine percentage points below the average for all ages over 16 years old. However, by 2012, this age group’s participation had declined by almost 18 percentage points to 43 percent. This steep decline leaves the 16-to-19 year olds close to 22 percentage points below the state’s 64.6 percent rate for all adults.

At the other end of the spectrum, those who are in the oldest two age groups have experienced increased labor force participation. While the 55-to-64-year-old age group fluctuated in the early 2000s, it added almost 10 percentage points to the labor force participation rate between 1999 and 2012. Likewise, participation by those 65 and older increased almost four percentage points, and that takes in to account an almost 3 percent decline from 2011 to 2012.

There are several reasons for the decline in the participation rate over the last decade. The aging of the population, termed the Silver Tsunami by some, is cited most often. As the baby boomer generation reaches retirement, more and more will leave the labor force, driving the participation rate lower. While this may be true, the data suggest that in the near term, participation rates in those areas will be higher than they have been in the past. This will most likely be a combination of more people aging into these groups as well as the difficult economic times that may push retirement plans further into the future.

Two other commonly suggested reasons are directly attributable to the Great Recession – potential workers continuing their educations or workers going back to school, or frustration with job prospects that prompt people to drop out.

As more people return or decide to continue their education, they may leave or not join the labor force. According to the Current Population Survey, 10.2 percent of the population over the age of 16 was enrolled in school in 2012. In 2000, that was only 9.2 percent. While this trend is likely to be a positive factor in the long run by improving the quality of the nation’s labor force overall, in the short term it can push the participation rate lower.

Then with the difficult labor market in many areas of the country, some people may have given up looking for work altogether. This trend is hard to capture but is worrisome. Those who leave the labor force but are not in the process of improving their skills through education and training tend to become less and less employable as time passes.

Regardless of the cause, with fewer of the nation and the state’s population being included in the labor force, declines like Idaho has seen in the unemployment rate should be viewed in the light of a declining labor force.

Andrew.Townsend@labor.idaho.gov, Regional Economist
(208) 332-3570, ext. 3455