Labor force decline: Is it a guy thing?

Regular MinnEcon readers know we’ve been writing since the spring about the unprecedented drop in Minnesota’s labor force and the long term worries that go with it.

The percentage of working age people here who have a job or are unemployed and seeking a job is at a 22-year low. The portion of the state’s working age population that’s employed is also to a rate not seen since 1984.

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We still don’t know exactly why. However, we do know that similar trends can be found at the national level and a new analysis indicates the exodus from the labor force is much more of a guy thing

The Federal Reserve Bank of Cleveland took on the issue in a report released Monday. The Fed economists didn’t explain why people are leaving the labor force in the Great Recession. But they did put some demographics to it.

The first chart shows the spike in people leaving the labor force, a jump not seen in the prior two recessions (click on the charts to get a larger view).

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The next Cleveland Fed chart shows men leaving the work force at a much faster pace than women since the start of the recession in late 2007.

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The next chart shows white men in the work force by age. There’s a significant drop in the percentages of men in their early 20s to mid-30s who were part of the labor force at the start of the recession and, employment-wise, were nowhere to be found in December.

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Similar patterns can be seen among black men.

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The Fed analysis concludes it has more to do with age than gender:

The lowest U.S. labor participation rate since the mid-1980s is being driven by lower participation across all demographic groups, and especially by those under 29. The biggest exception is older men, whose labor force participation rate has actually increased since the beginning of the recession.

The odd and worrisome thing about these trends — nationally and for Minnesota — is that in an improving economy, the opposite should be happening.

Discouraged workers who left the labor force during the worst of the recession are supposed to be re-entering the work force and restarting their job search in better times. Instead, they’re on the sidelines.

No doubt some left the work force to go back to college. But the recovery now is officially longer than the recession. In a normal recovery people should be returning to look for work –still unemployed perhaps, but at least looking again.

It’s a weird situation. We could very well continue to see the unemployment rate in Minnesota and the nation continue to improve but only because people are leaving the workforce.

Remember, Minnesota’s jobless rate fell in December even though the state lost 22,400 jobs during the month.

Take a look at the Cleveland Fed report and tell us what you see in the data. Post something below or contact us directly at MinnEcon.

  • John O.

    The increase in labor force participation by older men is probably due (in part) to many of them taking a buyout package from their employer and then reentering the job market with a lesser-paying job. I know from my own first-hand observations of other situations here at work is that many men who have taken buyouts and were at a salary of X are being replaced (if at all) by someone earning a fraction of X.

    In the case of many older workers 60+, at least some have been forced back in to the workforce to obtain employer-paid insurance to subsidize their Medicare benefit (if they are even eligible). Another plausible scenario is the hit many retirees took on their retirement portfolios took during the recession, necessitating a forced move back into the labor market to help make ends meet.

  • Erica

    In thinking about the decrease in the number of men in the workforce in their 20’s and 30’s, I wonder if they are leaving the workforce to stay at home with children?

    We are in that age group, and I see it with a number of our friends and acquaintances…The husband lost his job, wife has been able to keep hers, and with the cost of daycare, etc, sometimes it is a better solution for the family to have the dad leave the workforce for the time being to care for the young children…