Labor Force Participation Improves to 62.7%; Not In Labor Force Declines to 94,062,000

By Susan Jones | February 5, 2016 | 6:17 AM EST

"Any time you have a larger labor force labor force participation, you're going to increase growth, you're going to increase revenues. That's going to have an impact on the budget," Keith Hall, director of the Congressional Budget Office, told Congress on Thursday, Feb. 4, 2016. (AP File Photo)

(CNSNews.com) - The number of Americans not in the labor force last month totaled 94,062,000 -- a slight improvement from the 94,103,000  not in the labor force in December; and January’s labor force participation rate increased a tenth of a point, with 62.7 percent of the civilian noninstitutionalized population either holding a job or actively seeking one.

The Congressional Budget Office projects that the participation rate will remain at 62.5 percent through 2016 and then fall by roughly 0.1 percentage point per year, reaching 62.1 percent at the end of 2019. (More on that below.)

For all of 2015, the highest labor force participation rate was 62.9 percent in January: the lowest was 62.4 percent in September, and that 62.4 percent was the lowest in 38 years.

The Bureau of Labor Statistics said the economy added 151,000 jobs in January, and the unemployment rate dropped a tenth of a point to 4.9 percent from 5.0 percent in December.

In January, according to the Labor Department's Bureau of Labor Statistics, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, reached 252,397,000. Of those, 158,335,000 participated in the labor force by either holding a job or actively seeking one.

The 158,335,000 who participated in the labor force equaled 62.7 percent of the 252,397,000 civilian noninstitutional population.

"Any time you have a larger (labor force) participation, you're going to increase growth, you're going to increase revenues. That's going to have an impact on the budget," Keith Hall, director of the Congressional Budget Office, told Congress on Thursday.

Hall also told Congress that current employment is two-and-a-half million people short of what CBO considers "potential employment."

Long-term trends

Ahead of this month's unemployment numbers, the Congressional Budget Office released its Budget and Economic Outlook for 2016 to 2026.

The report noted that the rate of labor force participation has dropped noticeably in recent years. As CNSNews.com reported, it hit a 38-year low of 62.4 percent this past September.

CBO projects that the labor force participation rate will remain at 62.5 percent through 2016 and then fall by roughly 0.1 percentage point per year, reaching 62.1 percent at the end of 2019.

"The most important factor is the aging of members of the baby boom generation, even though that generation apparently has a stronger attachment to the labor force than that of people age 60 and over in recent generations," CBO said.

"The lingering effects of the recession and ensuing weak recovery also will continue to push down participation, in CBO’s view. Although many workers who experienced long-term unemployment because of the deep recession and slow recovery later found jobs, a notable fraction also left the labor force and remain categorized as not participating in the labor force.

"In addition, federal tax and spending policies -- in particular, certain aspects of the (Affordable Care Act) and the structure of the tax code, which pushes some people with rising income into higher tax brackets -- will tend to lower participation rates over the next several years" as people have less incentive to work.

CBO also noted that long-term trends include less participation in the labor force by younger and less-educated workers."

(As CNSNews.com reported in January, men and women ages 25-54 with less education were more likely to be labor force nonparticipants than their counterparts with more education, according to a report from the Labor Department's Bureau of Labor Statistics. And people with less education were more likely to cite illness or disability as their main reason for not working.)

On the employment front, CBO expects nonfarm payroll employment to continue increasing over the next few years, but more slowly than it did in 2015.

"After an average increase of 228,000 jobs per month in 2015, employment is expected to rise by an average of about 172,000 jobs per month in 2016 and about 124,000 jobs per month in 2017, reflecting an anticipated slowdown in the decline in the unemployment rate and slower growth in the labor force because of the retirement of baby boomers (people born between 1946 and 1964).

The unemployment rate fell from 5.7 percent in the fourth quarter of 2014 to 5.0 percent in the fourth quarter of 2015. According to CBO, most of that decline stemmed from a decline in long-term unemployment (that is, unemployment lasting at least 27 consecutive weeks) as those who had been unemployed long-term appeared to move into employment.  

CBO projects the unemployment rate will fall to 4.5 percent by the end of 2016 and reach 4.4 percent in 2017, leaving the rate roughly 0.4 percentage points below CBO’s estimate of the natural rate of unemployment.

“However, the relatively low unemployment rate does not imply that slack is no longer present in the labor market beginning this year. Some slack is expected to persist through 2020 because fewer people will be participating in the labor market than would do so if the economy was operating at its potential.”

Other data from January jobs report:

-- Among the major worker groups, the unemployment rates for adult men (4.5 percent) and Whites (4.3 percent) declined in January. The jobless rates for adult women
(4.5 percent), teenagers (16.0 percent), Blacks (8.8 percent), Asians (3.7 percent), and Hispanics (5.9 percent) showed little change over the month.

-- The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in January, at 2.1 million, and has shown little movement since June. These individuals accounted for 26.9 percent of the unemployed.

-- The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 6.0 million in January
but was down by 796,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back
or because they were unable to find full-time jobs.

In January, 2.1 million persons were marginally attached to the labor force, little different from a year earlier. (The data are not seasonally adjusted.) These
individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as
unemployed because they had not searched for work in the 4 weeks preceding the survey.

-- Employment rose in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Private educational services and transportation and warehousing lost jobs. Mining employment continued to decline.

-- In January, average hourly earnings for all employees on private nonfarm payrolls increased by 12 cents to $25.39. Over the year, average hourly earnings have risen by 2.5 percent. In January, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents to $21.33.


Also See:
Poverty Expert: To Boost Labor Force Participation Rate, Public Assistance Programs Should Promote Work
BLS: Less Educated People More Likely to Claim Illness or Disability As Reason for Not Working

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