The labor force participation rate is a measure of an economy’s active workforce that indicates the percentage of all people of working age who are employed or actively seeking employment. Labor force participation is calculated as the sum of all employed workers or those actively seeking employment decided by the total non-institutionalized, working-age population. This means that it omits people in prisons, nursing homes, mental hospitals, and the military and includes all other people of work age (16 or older).
In March 2020, the U.S. labor participation rate was about 62.7%. Figures remained around 63% since 2013; however, the COVID-19 pandemic significantly increased the number of people out of work. As a result, the labor force participation rate as of June 2020 is 61.5% Overall, the U.S. labor force participation rate has been declining since 2000.
Factors Influencing the Labor Force Participation Rate
The labor force participation rate is influenced by both short- and long-term economic trends. Short-term trends include unemployment rates and business cycles. Long-term trends include industrialization and the accumulation of wealth. Social factors also play a role in the labor force participation rate. Women have increasingly left their roles as homemakers to take on jobs, nearly doubling the women’s labor force participation rate between 1948 to 1998 (32% to 60%) and currently standing at 57.3% (as of March 2020). Additionally, the labor force participation rate is affected by demographic factors, such as a change in the working-age population between generations. The retirement of a large number of baby boomers has reduced labor force participation. In 1995, the share of working-age people in the labor force peak at 72% and has since fallen to 63.7%.
Labor Force Participation Rate by State
The following states have the highest labor force participation rates, in order: Nebraska (71.0%), South Dakota (69.0%), Minnesota (68.7%), Iowa (68.0%), Utah (67.1%), Kansas (67.0%), District of Columbia (66.7%), Colorado (66.2%), Wisconsin (66.2%), and Alaska/Connecticut (61.4%). The following states have the lowest labor force participation rates: Mississippi (53.0%), West Virginia (54.2%), New Mexico (54.5%), Florida (55.2%), Nevada (56.1%), Louisiana (57.1%), Arkansas (57.3%), Alabama (57.8%), Georgia (58.0%), and New York (58.0%).