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Expert explains weak labor force participation rate amid falling unemployment

Women in the workforce, money in the bank, career change opportunities

EVANSTON, Ill. --- While hiring in the United States showed a rebound and the unemployment rate has fallen to a new pandemic low of 4.6%, questions remain about the persistently sluggish labor force participation rate, which is now at 81.7%.

Matthias Doepke is professor of economics in the Weinberg College of Arts and Sciences at Northwestern and author of “Love, Money and Parenting: How Economics Explains the Way We Raise Our Kids.” He can be reached by contacting Mohamed Abdelfattah at mohamed@northwestern.edu.

Quote from Professor Doepke
“Two primary factors are at play. The pandemic led to large drop in women’s employment, in part because of childcare, and in part because women’s employment is concentrated in industries and occupations that were heavily affected by the crisis. When women lose jobs, they are generally more likely than men to stay out of the labor force for an extended period of time, for example because they switch childcare arrangements. It is not just childcare though — women are more likely to stay out of the labor force even if they don’t have minor children at home. 

“The second factor is simply that this is a great time to switch careers and look for better opportunities. The labor shortage means that it is easy to find new and potentially better jobs. At the same time, the large transfer payments during the crisis combined with a large rise in the savings rate means that many households have enough cash to get by for a while even when not working; in tougher times, many people have to hang onto jobs to pay the bills. So, both women and men are using this moment to look for better opportunities, and that shows up in the numbers.”