Labor Force Participation in New England vs. the United States, 2007–2015: Why Was the Regional Decline More Moderate?
A number of papers have tried to make sense of the declines in U.S. labor force participation in recent years and to estimate the extent to which the currently depressed participation rate reflects cyclical rather than structural factors. Different methods yield different conclusions, but the most recent evidence (Aaronson et al. 2014) suggests that structural factors—the most important among these being population aging—explain a significant or even a dominant share of the net declines in participation since 2007.
In the New England region, the labor force participation rate has also fallen significantly since before the Great Recession. New England's August 2016 participation rate fell short of its own pre-recession peak value (from November 2006) by 2.4 percentage points, and the peak-to-trough decline for the region was a full 3 percentage points. (New England's trough occurred in October 2015.) These data indicate that the region's participation rate declined by a smaller margin than the nation's since 2007. As a result, the positive gap between New England's participation rate and the U.S. rate, a gap observed at least as far back as the mid-1970s, increased from an average of 1.8 percentage points in 2007 to an average of 2.6 percentage points in 2015. This paper seeks to identify the main forces that contributed to the recent declines in labor force participation in New England and the forces that moderated recent declines relative to the national trend. This exercise contributes to an assessment of the outlook for participation in the region moving forward.