- Kassi Hall and Cat Spencer
The two graphs above show the fluctuations and growth of the Civilian Unemployment Rate and the Civilian Labor Force in the United States since 1948. By looking at the graphs, it is clear that since the Baby Boom following World War Two, the labor force has been growing at an exponential rate over time with no sharp fluctuations. This is to be expected as large masses of people were entering into the labor force with each year while fewer were leaving, except for in times of recession. The periods of recession during the last seventy years are shown by the areas highlighted in grey. In the graph of the Civilian Unemployment Rate, during recessions, unemployment rates spiked. The rate of growth in the labor force has leveled out or even decreased slightly in these recessions as well. This could be caused by the population feeling discouraged by a lack of job opportunity, the fact that people may have chosen not to enter or to leave the labor force, or the decrease in the percentage of the population actively looking for work.
In recent years, it appears that the labor force has begun to plateau and even slowly decrease as the Baby Boomers begin to retire. It is clear in the graph that until about 2009, our labor force from was still growing at the exponential rate, even with the retirement of the baby boomers as they reach the age of 65 or 70 years old. This is because of a continuously high rate of immigration. The United States had been in a relatively special situation compared to other developed nations as our population distribution continued to grow even with an aging population because people from other countries continued to immigrate to the US. However, Immigration rates are especially sensitive to the state of the economy, so immigration slowed because of the Great Recession in 2008. Now, we are starting to see the effects of population distribution on the economy.
Total Factor Productivity is all that matters in the long run, and most models of Total Factor Productivity can’t capture short run fluctuations. This means that we won’t know if the plateau in the growth of the US labor force will have any long term effects on productivity yet.