The U.S. Bureau of Labor Statistics projects slow labor force and employment growth over the next decade, impacting GDP growth, which is forecasted at a modest 1.9 percent annually. These subdued growth rates result from factors like lower population growth and an aging workforce, which have been contributing to slower GDP growth. Labor force growth is expected to decelerate to 0.4 percent annually, with an aging population playing a significant role. Population growth is also slowing, primarily due to fertility rates staying below replacement levels and reduced immigration. This demographic shift is associated with a declining labor force participation rate, which is projected to continue declining to 60.4 percent by 2032, affecting overall economic growth.
General Overview:
- The U.S. Bureau of Labor Statistics predicts slow labor force and employment growth in the next decade.
- This subdued growth is expected to impact GDP, which is projected to grow at an annual rate of 1.9 percent.
- Despite substantial recovery since the 2020 recession caused by COVID-19, the economy appears to be at or near full employment.
- Demographic trends, including lower population growth and an aging workforce, continue to influence lower growth rates.
Labor Force and Economy Projections:
- The U.S. Bureau of Labor Statistics publishes annual job outlook and labor force projections for the next 10 years.
- Projections cover the period from 2022 through 2032 and support resources such as the Occupational Outlook Handbook.
- Slower labor force growth in recent decades has contributed to slower GDP growth.
- Factors driving this slowdown include lower population growth and the aging of the U.S. population.
Labor Force Trends:
- Labor force growth was 0.6 percent annually from 2012 to 2022, slower than previous decades.
- Projections indicate further deceleration to 0.4 percent annual growth through 2032 due to an aging population.
- Key trends include a shift from the 65-to-74 age group to the 75-and-older age group, reducing workforce participation.
- The gap between men’s and women’s participation rates is narrowing, particularly among prime-working-age individuals (ages 25 to 54).
- A recent increase in women’s participation in the 25 to 34 age group coincides with a declining fertility rate.
- Young people’s (ages 16 to 24) labor force participation is projected to continue decreasing.
Impact on GDP:
- Slower labor force and employment growth will limit GDP growth over the next decade.
- GDP is projected to grow at an annual rate of 1.9 percent from 2022 to 2032, primarily driven by productivity gains.
- These productivity gains are expected to be 1.9 percent annually.
Unemployment Rate and Employment Growth:
- Projections assume the unemployment rate in the target year (2032) will be equivalent to the nonaccelerating inflation rate of unemployment (NAIRU).
- The unemployment rate was 3.6 percent in 2022, below NAIRU, but it is expected to rise to 4.3 percent by 2032.
- Slow labor force growth and higher unemployment will result in employment growth of 0.3 percent annually from 2022 to 2032.
Labor Force Projection Overview:
- The impact of lower population growth and an aging workforce is expected to accelerate in the coming decade.
- Labor force growth is projected to decelerate to 0.4 percent annually, up from 0.6 percent in the preceding decade.
- This equates to a labor force of 170.7 million in 2032, up from 164.3 million in 2022.
- Population growth has also slowed to 0.7 percent annually, primarily due to fertility rates below the replacement level and reduced immigration.
- The aging population is associated with a declining labor force participation rate.
- The overall participation rate is projected to decrease to 60.4 percent by 2032, with an average annual decline of 0.3 percent.
