December 2013

Declining Labor Force Attachment and Downward Trends in Unemployment and Participation

Regis Barnichon and Andrew Figura


The U.S. labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock-flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through unemployment, while other nonparticipants enter the labor force mostly through employment.

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Keywords: Unemployment rate, labor force participation rate, individuals marginally attached to the labor force

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Last Update: June 26, 2020