By Gwen Kervin, Regional Economist

The labor force participation rate in the United States is lower now than before the COVID-19 pandemic disrupted labor markets in early 2020. However, the country's labor force participation rate has been declining for the past two decades, mainly due to demographic shifts. Although COVID-19 initially affected labor force participation in both Utah and the United States, Utah's labor force participation rate has fully recovered, hovering around 68.5% by the end of 2022, compared to 68.3% in January 2020. The labor force participation rate in the United States was 62.3% at the end of 2022, down from 63.3% in January 2020, just before the COVID-19 pandemic.

When evaluating participation in the workforce, economists often reference the labor force participation rate, which is the percentage of the population over the age of 16 who are either employed or actively looking for work. The Bureau of Labor Statistics calculates the labor force participation rate based on population estimates from the Current Population Survey, a monthly survey conducted by the U.S. Census Bureau.

Looking at a longer trend, the United States' labor force participation reached 67.3% at the beginning of 2007, while Utah's labor force participation peaked at 73.4% in 1994. These levels were seen when the baby boomer generation was fully engaged in the workforce. The baby boomer generation has been a driving force behind labor markets in the United States since the 1970s when the earliest baby boomers began entering the workforce. Over the succeeding decades, this generation, which composed a large proportion of the overall population, propelled the U.S. economy to its broadest size ever, adequately supplying labor and, in turn, demanding additional goods and services.

While Utah experienced a baby boom population expansion at the same time as the United States, Utah also had a further population surge when its baby boom generation produced even more children. That second generation began entering the workforce in the mid-1990s. The combined effect of these population surges propelled Utah's labor force participation rate to one of the highest in the nation. From the beginning of 1989 through 2009, the state maintained a labor force participation rate above 70.0%, well above the U.S. average. Around the time of the Great Recession of 2008, Utah's demographic-surged labor force participation rate began to slow down. It was destined to naturally decline at that time due to the initial baby boom generation starting to reach retirement age. However, the Great Recession lowered Utah's rate more rapidly than the slowly transitional pace that would have happened naturally. By the time the Utah economy fully recovered from the Great Recession's long shadow, the labor force participation rate could only reach 69.0%. But given the state's somewhat older demographics by then, 69.0% was basically as good as the state could be expected to produce.

It is not uncommon for labor force participation to decline in response to a recession, but it typically recovers afterward. However, the end of the Great Recession coincided with a long-term, structural shift in U.S. labor markets, as the leading aspects of the baby boom generation began exiting the workforce, resulting in a protracted downward trend in labor force participation. This retirement decreased the labor supply, which is a driving factor in the nation's currently tight labor market. While baby boom retirements are a factor in Utah's labor force, they do not have the same impact on the labor market as they do at the national level. Utah's economy benefits from the post-baby boom bump it experienced in the late 1970s and early 1980s, which has allowed Utah's economy to maintain a higher labor force participation rate than that of the United States.

More recently, labor force participation was impacted by the economic fallout tied to the COVID pandemic, but its effects were different in Utah than in the United States. Both the United States and Utah experienced a decline in labor force participation when the pandemic initially hit. However, as jobs came back, many people continued to stay out of the workforce due to concerns about contracting COVID, fears of long-COVID symptoms, generous government relief, and reduced access to child care. Many of these factors have now run their course, and labor force participation is again on the rise.

In the United States, both men and women saw a sharp decline in labor force participation in the first several months of 2020. For the most part, throughout 2021, women in the United States experienced a larger decline in labor force participation than men, but did see improvements for most of 2022. By contrast, women in Utah experienced an initial decline in labor force participation in the first months of 2020, but rapid recovery soon followed. Women, particularly those in the older age groups, actually increased their participation in the labor force until mid-2022, after which women's overall participation rates fell below their pre-pandemic levels, even as men's participation rose above January 2020 levels.

A more nuanced interpretation can be made when examining how men and women in different age groups have shifted their labor force participation following the COVID pandemic. In the United States, men's participation in the labor force has largely declined since January 2020, except for the 16-19 age group, who have been enticed into the workforce by higher wages for entry-level positions. On the other hand, men in Utah have increased their participation in the labor force in all age groups except for those between 25 and 34. In contrast, women between the ages of 16 and 34 in Utah have decreased their participation in the workforce.

The state's relatively young population will keep Utah's labor force participation rate higher than that of the United States for some time to come. The labor market will tighten even more as additional baby boomers retire. Without sizable in-migration, this will keep labor markets tight, which will probably keep wages increasing. Such an increase may encourage younger and other sidelined workers to enter the labor force.