Along with improving economic growth will come a tighter labor market in which employers will need to compete for the best workers. This typically results in rising wages, which will entice even more individuals into the labor market due to increasing job opportunities and higher wages.
Much of the decline in the labor force participation rate is structural, however some is cyclical and due to the poor economy. As the Baby Boomers are just now entering into their retirement years, the overall participation rate was set to decline regardless. Even as older Americans today – the country’s largest, most educated and productive generation ever – work more than in previous generations, their participation rate is still less than one-fifth that of the typical 40 year old. On the other end of the spectrum, young Americans are enrolling on school in larger numbers than past generations, thus weighing on the overall participation rate as well – although higher educational attainment will be an economic boost in the future. With that being said, some of the participation rate decline is cyclical and due to the poor economy. As job opportunities increase and higher wages entice more workers back into the labor force, there will likely be a cyclical rebound in the participation rate, albeit a small one. Nationally, IHS Economics expects the participation rate to increase approximately 1 percentage point and the employment to population ratio to improve nearly 2 percentage points. In Oregon those increases are expected to be a bit stronger at 1.5 and 2.3 percentage points, respectively. These large improvements in Oregon stem from the fact that stronger job growth in the state coupled with stronger population gains will provide the additional capacity and demand above the expected national rebounds.
This has been adopted from our office’s latest quarterly economic and revenue forecast.