Friday, November 24, 2017

Will labor force participation rate in the U.S. fall to 59% in 2025?

Since 1995, the rate of participation in labor force, LFPR (the portion of people in labor force) for the working age population (16 years of age and over) has been on a long-term decline. What is the bottom line for this fall? A quasi-scientific answer is shown in Figure 1.  We have found that the evolution of LFPR is symmetric since 1995. Considering 1995 as a pivot point, we mirror-reflected  the current curve and obtained a symmetric future repeating the past. For this dismal future, the LFPR falls to 59% in 2025. At least 30 years (since 1992) are really repeated.
The reader may doubt that such a symmetry is possible and thus cannot be used for quantitative projections.  The Russian economist Kondratiev introduced long-period (50 to 60 years) waves in economic evolution (see Figure 2 borrowed from wikipedia). Looks very similar in period and phase.
Do not be so sure that the LFPR is not free falling into the 2020s.

Figure 1. The actual LFPR curve (black) and that mirror-reflected in 1995 (red line). Both curves practically coincide between 1982 and 2012.
 

Figure 2. The Kondratiev wave.

 

 

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