St. Louis Fed, Report: The Labor Force Participation Rate, Explained

“A decline in the number of people participating in the labor force can have a negative impact on the overall economy.”

“According to research published by the Federal Reserve Bank of Philadelphia in 2017, a falling LFP rate can slow the growth of GDP, since “fewer people are contributing to the nation’s output of goods and services.” Additionally, a lower participation rate can lead to higher tax rates, since the government has a narrower tax base from which to draw revenue, the authors noted.”

“The labor force participation rate is one of many important statistics to look at when examining the overall health of the labor market. Understanding the factors affecting the rate can also help in understanding the potential impact of LFP trends on the economy as a whole.”