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October Economic Update

October 4, 2019

Economics is an occupation with no shortage of data. One piece of data economists watch is the participation rate (the number of people who either have a job, or are looking for one). Economists watch this data for both demand and supply reasons.

The demand reason: participation rate provides an indication of the current strength of the labour market (people are more likely to look for a job when they can get one). The supply reason: the number of people who want to work partly determines how strong the economy can grow.

Over recent decades the participation rate has been trending up, and is now at a record high. One reason is that a strong labour market was creating plenty of jobs. Another is that slow wages growth means that some households need more income earners. Here is some demographic information about changes in participation rates:

  • Female participation is now around 10 percentage points below male participation rates (40 years ago it was well over 30).
  • There was a (gradual) decline of male participation, although that appears to have plateaued.
  • There has been a notable rise in participation of older age groups (older than 55).
  • In the 15-24 year old group, female and male participation rates are about the same. It is also the only age group where participation rates have not risen over the past ten years.

The participation rate currently being at a record high is a sign that the labour market has been doing well. And the trend rise in participation has helped sustain the economic momentum over the longer term. Some data is more important than others. For long-term economic performance, the participation rate is one of the important ones.