The labor force participation rate is the lowest it has been in 50 years, excluding the Covid era
A rented now sign is posted in the window of a Chipotle restaurant on June 5, 2026 in Los Angeles, California.
Justin Sullivan | Getty Images
On the surface, the drop in the unemployment rate in June helped provide some contrast to what was a low jobs report – but it was for all the wrong reasons.
This is because the unemployment rate fell to 4.2%, which is the lowest figure in a year, mainly due to the migration of workers to work, according to data from the Bureau of Labor Statistics on Thursday.
In fact, the average number of people of working age or looking for work fell to 61.5%, the lowest figure since March 2021. Despite the Covid-era labor market, it was the lowest labor force participation rate in exactly 50 years.
The decline in the number of workers marks a “mass exodus” caused by a number of factors, said Mike Reid, head of US economics at RBC.
“The unemployment rate fell to 4.2% as the number of unemployed workers declined,” Reid wrote in comments after the report. “This may be a matter of retirement but it may also be a matter of people who were looking for a job leaving.”
To stop searching
In the organization’s domestic survey, where the participation numbers are drawn, it is the case of permanent contract workers who may be driven by unemployed workers who simply quit.
In June alone, the number of workers, the ratio of those employed or unemployed to those looking for work, fell by 720,000. Similarly, the lists of those counted as out of work, a group that includes the unemployed and those not looking for work, jumped by 832,000.
And while the establishment survey, which measures the number of jobs filled, showed a monthly increase of 57,000, the household survey, which measures the actual level of those working, fell by 507,000.
Year over year, the number of workers decreased by a little over 1 million, while the employment rate also decreased by 1.06 million and the number of unemployed increased by 40,000. The employment rate fell to 59% in June, the lowest since October 2021. All that happened while the unemployment rate rose by one-tenth of a point to 4.2%.
“What concerns me most is not the unemployment rate,” said Dan North, chief economist for North America at Allianz. “What is an important development is the level of participation, and this is a big leg down in one month, and during the last year it is a very good leg down. I think this is a very important number.”
Not just retirees
The decline in participation has been partly attributed to declining numbers of immigrants and younger retirees and Gen Xers.
However, in June the largest decline came from what are defined as “prime-age” workers, or those between the ages of 25 and 54. That rate fell 0.6 percentage points to 83.3%, the lowest since December 2023.
“If we look at the numbers now, that argument doesn’t hold up very well,” North said of retirement and immigration. “I hate to use the word ‘scary,'” he added, but said the numbers are cause for concern.
To be sure, some economists say that June’s numbers seem out of whack. Specifically, they pointed to a sharp decline in leisure and tourism workers as a sign that the data could be noisy.
But the participation numbers are part of an ongoing trend.
“It was shocking to see 720,000 people stop looking for work altogether and the tourism industry shed jobs,” wrote Heather Long, an economist at Navy Federal Credit Union. “It’s a better job market than last year, but the opportunities are slim.”
