Labour-force participation on the rise in euro area – United States trending in opposite direction

Abstract

Labour is one of the key components of economic growth, alongside capital formation and productivity. Labour supply in the euro area has been supported by a slight uplift in labour-force participation since the financial crisis. This is measured by the labour force participation rate, defined as the total number of employed and unemployed persons relative to the same-age population. By contrast, in the United States labour participation has declined notably. Because the participation rate declines as the population ages, demographic change has eroded the participation rates of both regions. In the euro area, however, increased participation especially among 50–64-year-olds has successfully offset the negative impact of population ageing on the participation rate. Yet what remains troubling is that the labour market participation of young people has declined in both regions.