The U.S. labor force participation rate among prime-age workers 25 to 54 stood at 83.7% in August—the most recent data available—just below the cyclical peak of 83.9% in August last year.
When the partial jobs reports are released in the coming weeks, the focus will rightly be on top-line growth and back revisions to the data, but we think that the participation rate among workers in their prime also bears monitoring.
That data, in our estimation, will tell a tale of stability and resilience in the labor market, in contrast to the overwrought concerns about the top line slowing.
Current conditions are being driven by a mix of demographic changes like the aging workforce, restrictive immigration policies and uncertainty about trade rather than a classic slowdown that is a harbinger of recession.
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Should prime-age employment remain at or near its cyclical peak, that dynamic to us means a sustained business cycle, not a risk of a premature termination to that cycle even though the American economy under the current conditions needs to generate only 50,000 jobs a month to keep the labor market stable.
In the end, monthly labor gains under current conditions are not an economic or financial problem. They are a political problem for Washington, and that is another topic for another day.
