What will be the participation rate in December 2023?

by calculated risks 11/1/2023 09:21:00 AM

I previously posted some questions on my blog for next year: Ten Economic Questions for 2023. Some of these are related to real estate (inventory, house prices, housing construction, new home sales), and I’ll be posting thoughts on those in the newsletter (there will be others like GDP Gross and employment on this blog).

I’m adding some thoughts, maybe some predictions to each question.

4) Participation rate: In December 2022, the overall participation rate was 62.3%, up year-on-year from 62.0% in December 2021, but still below the pre-pandemic level of 63.4%. In the long term, the BLS expects the overall participation rate to drop to 60.1% by 2031 due to demographics. What will be the participation rate in December 2023?

The total labor force participation rate is the percentage of the working-age population (16 years and over) in the labor force. Much of the decline in the participation rate since 2000 is due to demographics and long-term trends.

The labor force participation rate in December 2022 was 62.3% (red), down from the pre-pandemic level of 63.4% in February 2020, and up from the low pandemic level of 60.1% in April 2020.).

In April 2020, 8.15 million people left the workforce due to the pandemic. By December 2022, the workforce was about 0.5 million higher than its pre-pandemic high.

We know that population growth has been weak over the past several years, and baby boomers are now retiring in droves. And there are ongoing impacts of the pandemic on the workforce (more than 1.1 million deaths in the US, some people are unable to work due to prolonged COVID, and people with weakened immune systems or the elderly avoid other people and not work).

Employment percentage of the population, 25 to 54The second graph shows the participation rate of workers in the “peak age” (25 to 54 years). Participation was 25 to 54 at 82.4% in December 2022 (red), down from the pre-pandemic level of 83.0%. This suggests that we may see another increase in the initial participation rate, however most workers of adulthood are re-entering the workforce.

There will probably be a few more people who will return to the workforce in 2023, which will lead to a higher participation rate. However, demographic factors will push the price lower. So, I think the engagement rate will be mostly unchanged year-over-year, about 62.3%.

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