The figures for the month of March are clear: in the United States, unemployment is declining and employment is increasing. However, this rebound in the labor market is accompanied by another trend: Americans are less and less likely to work or look for a job, as reported by the Wall Street Journal. In March 2026, the percentage of the working-age population that is either employed or seeking employment (editor’s note: the labor force participation rate, for economists) declined to 61.9%. This is the lowest rate seen since 1977, excluding the pandemic period.
This indicator is important because it helps measure a portion of the economic growth potential. In essence, the economy grows either because more people are working or because each worker is producing more. A lower labor force participation rate means slower long-term economic growth, as summarized by economist Gus Faucher in the American media.
Aging population and decrease in immigration
Since the 2000s, this indicator has been gradually decreasing. The aging population is believed to be the main factor. The baby boomer generation began to reach retirement age at the beginning of the century, which has a lasting impact on the activity rate. Additionally, early retirements among workers aged 55 and older. The pandemic led many of them to leave the labor market before the age of 65, and this trend seems to continue. Some may have chosen to retire from work due to difficulties in finding a job after losing one, disruptions related to the rise of artificial intelligence, or thanks to the capital accumulated in their homes or retirement savings.
In this age group, the labor force participation rate has dropped from 40.2% in January 2020 to 37.2% in March 2026, its lowest level in over twenty years.
Another factor contributing to the decline in this index is the tightening of Donald Trump’s immigration policy. The decrease in immigration and the increase in deportations have affected groups of young people, often coming to the United States to work, thus contributing to the aging of the workforce. Such a situation could have consequences on the American economy, as it may face shortages of labor in certain sectors.
Some encouraging signals
But not all indicators are negative. For several years, productivity has experienced above-average growth. A positive development according to Greg Daco: “this has largely offset the slowdown in labor force growth,” details the chief economist of EY-Parthenon, a consulting firm specializing in transformative strategy and transactions. However, he qualifies this observation: the question of productivity gains in the years to come remains open.
Another encouraging signal: the participation rate of 25-54 year-olds remains near its highest levels in decades. According to economists cited by the Wall Street Journal, this suggests that the overall decline in participation is more due to the aging population and immigration policy than to a general discouragement towards the labor market.
