Texas Border Business
The Labor Force Participation Rate (LFPR) is a closely watched indicator of the level of engagement of people in the workforce, whether employed or seeking a job. The US Bureau of Labor Statistics (BLS) tracks the measure, which has recently fallen to levels not seen since the mid-1970s (excluding the pandemic). While notable, the implications of the decline are somewhat nuanced.
The LFPR is a simple concept representing the number of people in the labor force as a percentage of the civilian noninstitutional adult population. Anyone actively looking for work (or working) is counted in the numerator, and everyone who is 16 and older is counted in the denominator.
It is important to note that people never “age out” of the calculation, even when typical working years may be decades past. The retirement of the Baby Boomers and longer lifespans are thus mathematically pushing down the overall LFPR to some extent, and the decline is an inescapable outcome of US demographic patterns rather than a cause for alarm. Rates rose sharply beginning in the mid-1960s as women entered the workforce in large numbers, reaching peak levels in 2000 of more than 67% (compared to 61.6% as of August).
For 2025, BLS data indicates a participation rate for those 16 and older of 62.4%, down from 66.0 in 2005. In each age range above 25, however, engagement is as high or higher now than it was in 2005, which is contrary to the notion that people are “choosing not to work.” Participation varies significantly across age ranges. For people ages 25 to 54, participation is 83.6%. Rates fall fairly quickly to 66.6 for ages 55-64, 26.7 for 65-74, and 8.5 for 75 and older. Clearly, the aging of the population causes the LFPR to drop.
Rates remain generally higher overall for men than women. Participation is greater among Black people than white (due to the variation in rates for women), with Hispanics even higher. In fact, Hispanic men have the highest LFPR of any of the racial/ethnic groups tracked, at 74.7%.
Clearly, there are other factors in dropping participation, such as the “discouraged workers” who give up on finding a job and leave the labor force in difficult times. About 1.9 million people had been out of work for more than 27 weeks in August, and at some point, many of these individuals will just stop looking. Lower numbers of people entering the US to work is another factor, as is the tendency to enter the workforce a bit later than in the past. However, even if there is improvement in these factors, basic math and inexorable demographics will continue to place downward pressure on the LFPR. Stay safe!
______________________________
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 clients over the past four decades.
