Diplomas and Due Dates are Keeping Americans Out of the Labor Force

Key Findings

• 18.8% of people not looking for work are on the sidelines due to family responsibilities, an increase of 6.7% from two years ago.

• 15.5% are not looking due to schooling or training, also a 6.7% shift from two years ago.

• Collectively, these data reflect an uptick in family formations in the aftermath of the early-pandemic and normalizing college enrollments.

The labor market has done little to waver from its position of strength in recent months, even as economic headwinds have swirled. There are more jobs open than unemployed workers to fill them (nearly a 2-to-1 margin). Part of the reason labor supply has failed to satisfy hiring demand is the remaining shortfall in labor force participation— a phenomenon caused both directly and indirectly by the pandemic. The labor force participation rate (LFPR) has continued to improve gradually over the past year, ticking up and average of 0.1 percentage points per month. However, the LFPR remains down from where it entered the pandemic by another whole percentage point. Here, utilizing data from the Census Bureau's Current Population Survey (CPS), we will examine why some out-of-work Americans voluntarily choose to sit on the sidelines of the labor market.

From Newborns to New School Years

Family responsibilities are the single largest specified reason people have chosen to disengage from the labor market.[1] Nearly 1-in-5 people (18.8%) that have chosen not to look for work in the past four weeks meet this description.

Over the past two years, there has been a sizable shift towards this family responsibilities rationale for staying out of the labor market. Family responsibilities were the cause of 12.1% of disengagements in August 2020, with the share rising by 6.7% through August 2022.

Notably, an increasing share in this family responsibilities category against an improving labor market backdrop should be expected. While economic conditions partially influence family formation decisions, other reasons for not looking for work are far more sensitive to cyclical pressures. However, what is surprising is that family responsibility disengagements are not just rising relative to other categories— they are doing so in aggregate. Approximately 907k people were not looking for work due to family reasons in August 2022, 164k more than two years ago. 'Family responsibilities' is one of only two categories to see an aggregate increase over August 2020 levels.

The only other category to see large upward jumps in the past two years was “in school or other training.” As of August 2022, these upskilling individuals accounted for 15.5% of people not looking for work— a 6.7 percentage point shift from two years ago. Moreover, an additional 209k people fall into this category today than they did in August 2020

The largest declines over the past two years can be seen in the “believes no work available in area of expertise” and “Couldn't find any work” categories, which dropped off by 276k and 314k people, respectively. These declines reflect broad improvements in the labor market and the continued state of fervent hiring demand.

Takeaways

The relative and aggregate increases of working-age adults choosing schooling over a paycheck may be a welcome sign for reclaiming pre-pandemic normalcy. Students who enrolled in higher education for the Fall 2020 and 2021 terms had to consider the likelihood of campus-level COVID outbreaks and an altered collegiate experience. These data suggest that decisions on whether to attend school in Fall 2022 are motivated by a more traditional set of factors.

The uptick and potential workers claiming "family responsibilities” as a reason for not looking for work is interesting in a historical context. The crude birth rate fell by 9% between 2008 in 2010, continuing a steady pattern of accelerated declines during economic downturns. If these labor market data are any indication, the 2020 pandemic recession was unique in this regard, as many quarantines started with two people and ended with three.

[1] “Other” category removed from chart, accounted 32.4% of people not looking for working in the past four weeks.