Labor Market Exit and Re-Entry: Is the United States Poised for a Rebound in the Labor Force Participation Rate?

Current Policy Perspectives No. 14-2
by Daniel Cooper and María José Luengo-Prado

The U.S. labor force participation rate has declined sharply since 2007—far faster than can be explained by demographic shifts in the population. This brief analyzes the re-entry probability for individuals who exit the labor force as well as the financial demographic, and employment characteristics of these individuals. The vast majority of individuals under 45 years of age re-enter the labor market within four years of exiting; however, the re-entry rate drops substantially for 50–54 year-olds and 55–59 year-olds. Those individuals who exit the labor market appear more marginally attached to the labor force, and they have less financial resources to sustain themselves during long periods of being out of work. There is also some evidence that intra-household labor market substitution occurs when the household head exits the labor market first/first exits the labor market.

JEL code: J21

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