# Labor Force Participation Rate: Purpose, Formula, and Trends

## What Is the Labor Force Participation Rate?

The labor force participation rate is an estimate of an economy’s active workforce. The U.S. government's labor force participation rate formula is the number of people ages 16 and older who are employed or actively seeking employment, divided by the total non-institutionalized, civilian working-age population.

As of December 2024, the U.S. labor force participation rate was 62.5%, according to the [Bureau of Labor Statistics (BLS)](https://www.investopedia.com/terms/b/bls.asp), which publishes the figures monthly.

### Key Takeaways

*   The labor force participation rate indicates the percentage of working-age people who are employed or are actively seeking work.
*   In conjunction with the unemployment numbers, it offers some perspective into the state of the economy.
*   Social, demographic, and economic trends cause the rate to fluctuate from month to month.
*   Global labor force participation has shown a steady decline since 1990.

![Labor Force Participation Rate](https://www.investopedia.com/thmb/vfOasDRMLA6EjRQffLE9Nhd70R0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Investopedia_LaborForceParticipationRate-6589f46752cc48ef9a8af59ea4179bdf.jpg)

*— Investopedia / Sydney Burns*

## Understanding the Labor Force Participation Rate

The labor force participation rate is an important metric to use when analyzing employment and [unemployment](https://www.investopedia.com/terms/u/unemployment.asp) data because it measures the number of people who are actively job-hunting as well as those who are currently employed.

It includes all other people aged 16 or older and compares the proportion of those who are working or seeking work outside the home to those who are neither working nor seeking work outside the home. It omits institutionalized people, such as individuals in prisons, nursing homes, mental health facilities, and members of the military.

The labor force participation rate is considered to be somewhat more reliable than the unemployment rate because it accounts for people who have given up looking for work. The unemployment numbers do not take into account those who have given up looking for work.

Some economists argue that the [labor force participation rate and unemployment data](https://www.investopedia.com/articles/investing/103015/how-labor-force-participation-rate-affects-us-unemployment.asp) should be considered together to better understand an economy’s real employment status.

## Labor Force Participation Rate Formula

The formula for labor force participation is:

$\begin{aligned}&\frac{ ( \text{Number Employed} + \text{Number Seeking Work} ) \times 100 }{ \text{Civilian Non-Institutional Population} } \\\end{aligned}$

This applies to all members of the population at age 16 or older.

## Factors That Affect the Participation Rate

Labor force participation is affected by numerous social, economic, and demographic factors. As these factors change, labor force participation goes up or down. These changes can happen quickly or slowly. They might have a short-term impact on labor force participation, or they might create long-term change.

### Economic Factors

Short- and long-term economic trends influence the labor force participation rate. In the long run, industrialization and the accumulation of wealth can have an impact.

Industrialization tends to increase participation by creating employment opportunities. High levels of accumulated wealth can reduce participation because wealthier people simply have less need to work for a living.

In the short term, [business cycles](https://www.investopedia.com/terms/b/businesscycle.asp) and unemployment rates influence the participation rate. During an economic recession, the labor force participation rate tends to fall because many laid-off workers become discouraged and give up looking for jobs. Economic policies such as heavy labor market regulation and generous social benefit programs may tend to decrease labor force participation.

### Social Factors

Social expectations and changes to those expectations affect who is available to participate in the workforce. As different groups are expected to work or not, the labor force participation rate will go up or down.

For example, if married men are considered responsible for supporting their families, while married women are encouraged to stay home, women will stop working once married or after having children, which lowers the labor force participation rate. If the expectation is that both parents should be able to work, some parents of either gender will opt to stay in the workforce.

[Educational](https://www.investopedia.com/articles/personal-finance/062515/college-tuition-vs-investing-it-worth-it.asp) expectations impact the labor force participation rate. If more young people learn a trade or a family business as they are growing up and skip college, adults start entering the workforce between the ages of 17 and 19.

In countries or demographic groups where a college degree is regarded as a necessity, more young adults will continue their education after high school. Labor force participation will go down because they won't join the workforce until their early or mid-twenties.

### Demographic Factors

Changes in the working-age population from generation to generation influence labor force participation. As large age cohorts reach retirement age, the labor force participation rate can fall.

For example, the retirement of [a steady stream of baby boomers](https://www.investopedia.com/articles/investing/080614/boomers-slow-down-will-economy-follow.asp) has reduced labor force participation. Baby boomers are one of the largest demographic blocks in the population. Since generations after the baby boomers are smaller, they will not be replaced by as many active, younger workers when they retire.

## Trends in the Participation Rate

The labor force participation rate changes based on economic, social, and [demographic trends](https://www.investopedia.com/articles/pf/06/demographictrends.asp) over the long term. It rose steadily through the second half of the 20th century, peaking at 67.3% in April 2000. As the Great Recession hit in 2008, the participation rate entered several years of steep decline, stabilizing at around 63% by 2013.

From 2013 on, the monthly figures held steady in the vicinity of 63%, however, with the onset of the COVID-19 pandemic in early 2020, the labor force participation rate fell dramatically, dropping from 63.3% to 60.1% in the first half of the year. The low point of 60.1% was in April 2020, after which the rate began to increase slowly. As of December 2024, it sits at 62.5%.  

The trend in the women’s labor force participation rate largely parallels the long-term trends for the overall population. The women’s labor force participation rate nearly doubled from 32% to 60% in the 50 years from 1948 to 1998. This rate dropped to 54.6% in April 2020 from 57.9% in February 2020. As of December 2024, it sits at 57.4%.

> **Fast Fact**
>
> The U.S. labor force participation rate of 62.5% in December 2024 included 57.4% participation for women and 67.9% participation for men.

## Why the Labor Participation Rate Has Declined

According to the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp), the share of prime-working-age people (25 to 54 years old) in the labor force peaked at 72% in 1995 and has declined since then. This roughly corresponds to some of the declining trends in labor force participation in the 21st century. There are reasons for this decline.

*   **The Great Recession**: During the Great Recession from 2007 to 2009, unemployment rose from 5% to 10%. In the decade that followed, the labor market recovered. However, many workers who had left the workforce never returned to full-time work, even when jobs became available. Though overall unemployment returned to pre-recession levels, rates of long-term unemployment increased as workers who had lost jobs stayed out of the labor force for longer periods.
*   **COVID-19**: There was a sharp drop in labor participation in early 2020, as the COVID-19 pandemic shut down the U.S. [economy](https://www.investopedia.com/economy-4689801). Many were unable or unwilling to remain in face-to-face jobs, while others left their jobs to take care of family members at home. Due to caregiving expectations, women left the workforce at higher rates than men.
*   **Retirement**: Baby boomers are no longer the largest segment of the population, having been surpassed by millennials, but they are still a significant factor. From 2007 to 2014, up to half the decline in labor force participation was a result of the workforce aging, according to the Council of Economic Advisors.
*   **College**: An increase in [college attendance](https://www.investopedia.com/terms/c/cost-of-attendance.asp) reduces labor force participation. College enrollment increased steadily from 1999 to 2011, from 14.85% to 21.01%. It then started to decrease and continued to do so through 2022 when enrollment was 18.58%. The estimated 2024 enrollment number increases to 19.25%. It is expected that enrollment will gradually increase going forward, with enrollment estimated at 19.57% in 2025 and 20.23% in 2031.

> **Important**
>
> The national unemployment rate in the United States was 4.1% in December 2024.

## Global Labor Force Participation

Global labor force participation has shown a steady decline since 1990. According to the [World Bank](https://www.investopedia.com/terms/w/worldbank.asp), the global labor force participation rate stood at 61% as of 2023, down from 62% in 2010 and 65% in 1991. It dropped to a low of 59% in 2020 during the pandemic and has steadily been increasing since, reaching 61% as of 2023, the same level as before the pandemic in 2019.

The following table highlights the countries with the highest and lowest labor force participation rates as of 2023 (latest data available):

## What Does the Labor Force Participation Rate Formula Measure?

The labor force participation rate measures a country’s active workforce of people 16 and older. It includes people who have stopped looking for work but still want to work. The official unemployment rate does not count those discouraged workers.

## What Affects the Labor Force Participation Rate?

Three major factors influence the rate: economic, demographic, and social. For instance, the recent retirement of baby boomers in great numbers has pushed the rate down, while the introduction of large numbers of women into the workforce in the second half of the 20th century increased the rate. In April 2020, after the COVID-19 pandemic struck the U.S., the rate went down by more than 3% compared to the beginning of that year.

## How Does the U.S. Labor Force Participation Rate Compare With Those of Other Countries?

According to the World Bank's most recent data from 2023, the U.S. falls in the middle of the pack at 62% and ahead of the world rate of 61%. The highest rate was held by Qatar, at 89%, and the lowest by Djibouti, at 32%.

## How Is the Labor Force Participation Rate Measured?

The labor force participation rate is based on a monthly household survey conducted by the U.S. Census Bureau. This survey asks respondents about their age and whether they are employed or looking for work. On that basis, the government estimates the labor force participation rate.

## Why Is the Labor Force Participation Rate Declining?

The participation rate has steadily declined since the late 1990s, largely due to the retirement of baby boomers and other significant demographic changes. In 2020, there was a sharp drop in labor participation due to the COVID-19 pandemic, which shuttered many businesses and forced many people to temporarily leave the workforce.

## The Bottom Line

The unemployment rate is more closely watched but it is best understood when viewed in conjunction with the labor force participation rate.

That's because the labor force participation rate counts those discouraged workers, people who are willing and able to work but have given up looking for a job. Neither of these numbers exists in a vacuum. Many social, economic, and demographic factors cause the unemployment rate and the labor force participation rate to fluctuate over time.

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