US Economic Perspectives: Market myths: Falling LFPR has kept the unemployment rate from rising

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US Economic Perspectives: Market myths: Falling LFPR has kept the unemployment rate from rising

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US Economic Perspectives 14 May 2026

Market myths: Falling LFPR has kept the

Brett Ryan unemployment rate from rising

Senior US Economist

+1-212-250-6294

• Since peaking at 4.5% last November, the U-3 unemployment rate (UR)

has declined by ~20bps, averaging a little over 4.3% since January. Over Justin Weidner

the same period, the labor force participation rate (LFPR) has declined by Economist

+1-212-469-1679 ~50bps, averaging just under 62.0% since the beginning of the year. The

drop in the UR alongside a larger decline in LFPR has fueled the market Matthew Luzzetti, Ph.D.

narrative that LFPR is the sole reason for the steady readings on the UR. Chief US Economist

+1-212-250-6161

• Though the drop in LFPR may have been a minor factor, we disagree with

the narrative that the UR would be meaningfully higher absent the recent Amy Yang

decline in LFPR. Economist

+1-212-250-9959

• As the BLS explained in its March technical note, this year’s household

survey population controls put downward pressure on LFPR but did not

impact the UR.

• While there are times when movements in LFPR can drive the UR higher

/ lower – it’s not uniformly the case to assume that the UR would be

higher if participation was higher and vice versa. Case in point, the age

cohort with the largest UR increase over the last three months also

witnessed the largest decline in LFPR.

This year’s household population control update was different

Each year, the Census Bureau adjusts their population estimates to include the

latest information about population change and to incorporate improvements in

their estimation methodology. This year’s adjustment reflected changes to