Worrisome changes in U.S. labor force and employment since 2007.

• Author: Higgs, Robert
• Position: Etceteras ...

Recent Labor-Force Anomalies

The United States has a long history of population growth and concomitant labor-force growth. As figure 1 shows, the number of men in the civilian labor force (that is, men either working in paid employment or actively seeking work) increased fairly steadily over the past half-century, at least until the onset of the current recession.

For the past six years, however, the number of men in the labor force has fluctuated around a fairly level trend line at approximately 82-83 million. This cessation of growth came on the heels of a 6-million-man increase during the previous seven years.

In the post-World War II era, the number of women in the labor force grew even more quickly than the number of men and also tended to grow fairly steadily. When the current recession began, the female labor force continued to grow, increasing by about a million women between the officially designated beginning and end of the economic contraction (December 2007 to June 2009) (see figure 2). In the second half of 2009, however, this growth stopped, and a slight reversal occurred, putting the total on a lower, fairly level trend line throughout 2010 and 2011, albeit still at a slightly higher level than the female labor force had reached before the recession began. Early in 2012, the female labor rose quickly by about a million women, but it then settled at that higher level for the next year or more, with no sustained tendency to rise further, as of the latest report available (for July 2013).

Labor economists and others have been puzzling over what has happened. Although labor-force growth tended to slow or even to halt momentarily during past recessions of the postwar era, the current cessation of growth has no precedent in that era; hence, analysts have found an explanation of it to be a challenge.

Whatever the answer(s), one thing is clear: unless the labor force resumes something like its historically normal growth, we cannot expect a resumption of historically normal economic growth. Labor inputs are major contributors to the production of goods and services. Increases in labor productivity arc only a partial substitute unless the rate of productivity growth can be made much greater than observed historically over long periods.

One also wonders: How are the millions of people who normally would have been in the labor force now occupying themselves? Who is supporting them? What are their expectations and plans? Their extended...