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From Home Furnishing Business

The Labor Force 2026: Can Shifting Demographics Meet Industry Workforce Needs

Although unemployment is down and an additional 10.5 million people are expected to be employed over the 2016 to 2026 decade, the diminishing rate of labor force growth due to an aging population and other changing demographics is projected to further slow the U.S. labor force participation rate.

Couple these demographic shifts with industry workforce needs in a changing e-commerce environment, and the U.S. workforce could be in for a wild ride in the not so distant future, according to projected data by the Bureau of Labor Statistics released in the fourth quarter of last year.

In addition to slow growth in the labor force, changes in the way consumers purchase products via e-commerce will dramatically shift the need and type of workers in many industries, especially retail.  Not since the exodus of consumer goods manufacturing from the U.S. will the need for workers be so impacted.

Industries are changing and growing alongside the population. As shown in Table A, the retail industry is adapting to a changing economic structure and many brick and mortar stores are forecasted to decline in employment over the 10-year period 2016 to 2026. Among these are traditional furniture stores, as well as electronic, department and clothing stores. Furniture Stores are expected to take a 10.2 percent negative hit in employment over the 10 years to 2026. Meanwhile the success of Home Furnishings Stores is expected to boost this channel’s employment 7.4 percent. In the same time period, Electronic Shopping and Mail-Order Houses are expected to gain 23.4 percent more employees.

The Labor Force 2026

How will the Labor Force look by 2026? And will there be enough workers to meet the specific needs of American industry? In 1996 all Baby Boomers were within the prime 25 to 54 age segment – roughly 72 percent of the total labor force. Thirty years later, projected in 2026, Baby Boomers will be 62 to 80 years of age and many will have exited the job market – leaving just 63.5 percent of the labor force between 25 to 54 years old (Table B). Between 2016 and 2026, the other significant change to the workforce will be among 35 to 44 year olds as the Millennials dominate this age group, growing from 20.6 percent of the workforce in 2016 to 22.2 percent by 2026. They will be the only age group under 65 to gain share of the workforce.

Figure 1 shows the percent change of the workforce by age group. Of particular note is the continual decline in workers ages 45 to 54, tempered by the growth in the 35 to 44 group.

The growth of both men and women in the labor force plummeted after 2006, due to both the recession and a slowing population growth. Although not the fast rise seen between 1996 and 2006, labor force growth is expected to increase for both sexes between 2016 and 2026, 5.3 percent and 8.0 percent respectively (Table C). The forecasted boost of women in the labor force brings their percent distribution up to 47.4 percent in 2026, but men remain in the majority at 52.6 percent (Table D).

Due to the influence of immigration on population growth and the projected rise of participation rates among Asians and Hispanic immigrants, the labor force is expected to become more diverse.  As the current population ages, the growth of White non-Hispanics in the labor force will decline further after falling 3.6 percent from 2006 to 2016 with an additional projected drop of 2.4 percent over another decade (Figure 2). As shown in Table E, both the Hispanic and Asian groups will increase their share of the labor force to 20.6 percent and 7.2 percent by a projected 2026.

Figure 2 shows the percent change in the labor force by race for the 10-year segments. Note the large Hispanic growth that occurred between 1996 and 2006.

As the younger generation’s participation in the labor force declines, and the workers over 65 increases, the median age of the Civilian Labor Force is projected to continue upward. Regardless of race, the median age of the labor force has climbed since 1996 and by 2026 all races are expected to have a median age above 40 with the exception of Hispanics at age 39.3 (Table F).

Labor Force Participation

Civilian Noninstitutional Population

Refers to people 16 years of age and older residing in the 50 states and the District of Columbia who are not inmates of institutions and who are not on active duty in the Armed Forces.

Labor Force

Labor force is the sum of employed and unemployed persons (actively looking for work).

Civilian Labor Force Participation Rate

The labor force participation rate is the labor force as a percent of the civilian noninstitutional population over age 16.

The labor force participation rate is the percent of the people working or looking for employment, divided by the total number of people over age 16. There are many reasons adults do not work. Some are too old or ill. Others chose to stay at home with children. Some have dropped out of the workforce and are no longer looking for employment. Others are unemployable for various reasons. Data from the Bureau of Labor Statistics in the fourth quarter of last year paints a picture of varied growth patterns in labor force participation rates among different age, gender, race and ethnic groups. These participation rates highlight some the economic and social frustrations in America today as government entities, education leaders and communities struggle to find solutions. 

While growth continues in both the adult civilian population and labor force, as discussed earlier, the rate has slowed and is projected to continue to slow (Table G). In the 20-year period between 1996 and 2006, both grew at about the same rate – 1.3 percent average per year for the population over age 16 versus 1.2 percent labor force growth. However, during the 10-year period of the Great Recession and subsequent recovery 2006 to 2016, the rates got out of whack, with the civilian population over 16 years of age growing on average 1 percent annually while the labor force grew only half that rate. The gap between the civilian population over 16 and the labor force population (those working or looking for work) will narrow only slightly in the years ahead to 2026 (Table G).

Depicted in Table H the large 65 plus older total population is on course to grow exponentially from 2016 to 2026 with most leaving the workforce. And while age segments 25 to 34 and 35 to 44 show growth during this decade, the number of 16 to 24 year olds is expected to decrease alongside 45 to 54 year olds. Those ages 55 to 64, many still choosing to stay longer in the workforce, projects a flat population growth.

As the labor force gets older, the overall labor force participation rate is projected to decrease – down to 61 percent by 2026 (Table I). But the individual age groups are of particular interest.  For the youngest age group 16 to 24, participation in the workforce declined steadily each 10-year span – from 66 percent in 1996 to a projected 53 percent in 2026. This decline in workforce participation is associated in part with a lower high school dropout rate and increased attendance at colleges, all positive factors. In fact, in many retail labor markets, senior citizens are filling the slots once held by teens and young adults.

Most worrisome, however, is that labor force participation rates among 25 to 54 year olds have trickled down, but all still expected to be above 80 percent in 2026. And while population numbers for 55 to 64 year olds are projected to hold at 41.3 million over 10 years, the labor force participation rate is expected to increase by 3 percent with more people working longer. For seniors 65 to 74, the Bureau of Labor Statistics predicts 30 percent will still be working in 2026.

The labor force is taking a huge hit with men leaving or not returning to the workforce. At a 74.9 percent labor force participation rate in 1996, the rate for men is projected to fall 11.6 percentage points to 66.2 percent by 2026 (Table J). However, contrary to strides being made by women in the workforce, just 56.1 percent of adult women 16 and over are expected to be in the labor force by 2026 – down 5.4 percentage points since 1996.

The workforce participation decline among women is only in two age groups – 16 to 24 and 35 to 44 year old women. Many in the 16 to 24 year old group are among the population staying in high school and then attending college. The 35 to 44 age group in part reflects women who have delayed marriage and child birth and who have exited the workforce to stay at home. The declining participation in this age group is expected to stabilize to 2026. Interestingly, these women are projected to return to the workforce by 2026 as demonstrated by the 45 to 54 year age group which will have the highest labor participation rate of any female age group at 76.4 percent.

Workforce participation rates were highest in 2006 just prior to the Great Recession in all race and ethnic groups, except White, non Hispanics (Table K). Rates in 2016 are projected to continue to decline among all race and ethnic groups from 2016 to 2026 as the population ages with the exception of Hispanics. Hispanics have more of its adult population under the age of 65 than any other race or ethnic group and are less impacted by the aging workforce. Hispanics have the largest percentage of its adult population ready to work at 65.9 percent, with Hispanic men having the highest participation rate of any sex or race at 74.4 percent.

In its purest form, full employment implies that any person wanting a job has one. The issue with employment data is that the Civilian Labor Force definition leaves out the number of people not looking for employment. These are the hidden numbers that are a challenge to economic growth.

The Bureau of Labor Statistics uses the Economic Dependency Ratio to highlight the impact of the non-employed which they define as the ratio of the number of people in the total population who are not in the labor force, per 100 of those who are. This is the portion of the population “dependent” on the working population. The BLS projections for 2026 highlight the growing economic pressure of the aging population on those in the workforce. Figure 3 shows that growth in the dependency of ages 65 and over will increase from 24.9 people per 100 workers to 30.9 older Americans. Even so, seniors still have the lowest dependency ratio. The dependency ratio of 16 to 64 year olds not in the labor force increased steadily to 2016, but is projected to lessen slightly by 2026. In 2026 there will be an estimated 35 Americans between the ages of 16 and 64 who are not working per 100 American in the labor force. Children under 16 still have the highest dependency ratio, but it has declined from 45.4 per 100 to a projected 2025 ratio of 38.9.

A high dependency ratio can exacerbate the problems a government faces in health, social security & education costs, which are most used by the youngest and the oldest in a population.

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