Factors behind Oregon’s declining labor force

By Josh Lehner
Oregon Office of Economic Analysis Blog..

Here is Oregon’s actual labor force over the past 10 years. Everything was going well until the Great Recession after which labor force growth stalled and held steady in outright numbers — which is to be expected — however since 2012 it has been declining outright — which overall is bad and potentially very bad. A lot of the focus has been on the labor force participation rate and why it is going down. The Oregon Employment Department found that about half of the participation rate decline is due to the aging of the workforce and about half for other reasons (namely a bad economy).


Well, new research by the Federal Reserve Bank of Philadelphia sheds some additional light on why people are leaving the labor force or participating less. This is making the rounds in the business and finance news media so I won’t discuss it too much, however it is very interesting and important.

At first the decline was primarily due to a bad economy, where job opportunities were tough to come by. Also, early in the business cycle the share of people not in the labor force  that also wanted a job increased quite a bit in 2008 and 2009. What has changed recently is the uptick in retirements. Since 2010 a lot of the decline has been due to retirements. In the generally bad story of the labor market in terms of the participation rate and employment to population ratios, this is actually very good news. It signals that the worst pain of the recession and its impact on participation rates has likely stopped for most age cohorts, however now we’re starting to get the full impact of the Baby Boomers aging out of their working years, which will weigh on the overall participation rate for years to come.

fedlfprI have much more in the pipeline this week and next on education, labor force and a nationwide county level look at the employment to population ratio.

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