Why Labor Force Participation Is Still so Low

The latest U.S. jobs report, released on Jan. 9, found that unemployment in the U.S. is nearly back to normal, at 5.6 percent. Still, a more telling statistic, the share of Americans in the labor force (people working or looking for work), barely budged at just 62.7 percent. That figure was significantly higher before the recession, at around 66 percent, but labor force participation started to fall in 2009 and has since been trending down.

This seems to confirm the worst fears of economists Larry Summers and Brad DeLong, who in a 2012 paper warned that unemployment could permanently damage the economy. Without government spending, that paper noted, unemployed people who couldn't find work would get discouraged, lose their skills, and drop out of the labor force indefinitely.