Labor Force Participation Rate

Yet another way to look at unemployment

In yesterday’s post, I covered another popular metric that is tracked alongside unemployment - the employment-to-population ratio.

Just like any metric, it’s not perfect. A key issue with that ratio is it doesn’t capture the aging demographic of our population. People are living longer in retirement and so there are less people who are of working age. This creates a downward pressure on the time series.

So, in comes the labor force participation rate to address that issue:

This ratio, like the other two employment metrics, saw an unprecedented drop in the past month as the pandemic ripped through the country. It’s a shame too, because after many years of decline, it was finally picking up little by little.

Since this ratio is based on the labor force population instead of the entire population, it hasn’t yet dropped to an all time low. And these days, not being at an all time extreme for a financial or economic metric kind of feels like a win.

We’ll check back in another month to see if that’s still the case.