The drop in the labor force participation rate

I noticed something interesting in this chart from CalculatedRiskBlog.com that I posted a few days ago. (This is not specific to Spokane.)

Look at the vertical ovals I have added to the chart. For all post 1970 recessions, the labor force participation rate kept increasing. But look at what happened right around 2001- the labor force participation rate fell and has continued falling. This is a major and significant change in direction.

With fewer people participating in the work force, are we less productive as a nation? Has automation replaced so many workers that we can achieve the same productivity with fewer workers?  Wouldn’t we be even more productive, as a nation, if we could put these displaced workers back into productive activity?

CalculatedRisk suggests the drop is due to demographic changes. The leading edge of the “baby boom” has already begun retiring.

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