Global Macro Chart of the Day: (#117): Unusually large drop in US labour force participation

Research evidence excerpt

Global Macro Chart of the Day: (#117): Unusually large drop in US labour force participation

Global Research

6 July 2026ab

Global Macro Chart of the Day Economics

Global(#117): Unusually large drop in US labour force

participation Arend Kapteyn

Economist

arend.kapteyn@ubs.com

+44-20-7567 0531

1.1m people have left the labour force since January (and it's not immigration)

Despite a weaker-than-expected payroll report on Friday, the unemployment rate edged

lower. At one level, that is no surprise: labour supply has been declining alongside labour

demand, meaning even a 57k payroll gain may be above the labour market's

"breakeven" rate. But the household survey points to something more unusual. Since

January, 1.1 million people have exited the labour force, including 720k in June alone,

pushing the labour force participation rate (LFPR) down 51bp to 61.5%. Outside

recessions, we have never seen a six-month decline of this magnitude since the series

began in 1948, and the drop ranks among the largest non-recessionary moves on

record. See our detailed write-up here.

This does not appear to be an immigration story, as population growth has accelerated.

Had the participation rate remained at January's level, the unemployment rate would

now be 4.98%, not the reported 4.19%. The last comparable declines occurred in 2013

and 2015, both of which were at least partly reversed. The composition of the decline

has also shifted: through May, participation fell most sharply among white Americans,

while June's drop was concentrated among Hispanic or Latino workers, and spread

broadly evenly across men and women. The decline also appears disconnected from the

relatively modest increase in marginally attached and discouraged workers, which