Commentary on US Bureau of Labor Statistics Annual Employment Projections 

Once a year, the Bureau of Labor Statistics (BLS) publishes its ten-year projections for the US labor market. This year’s report just came out and points to a grim picture of what we should expect in terms of job growth in the next decade. BLS projects that the U.S will add only 4.7 million jobs from 2022 to 2032, less than half a million jobs a year. For context, the US added 19.4 million jobs in the ten years between 2012 and 2022 so the projected job growth is only a quarter of what we had recently. This is despite BLS’ own projection of a GDP growth of 1.9 percent per year, which is in line with the growth rates of the last two decades. The good news is, if projections materialize, we should see a significant increase in labor productivity. The bad news is, the projections suggest the next decade is less likely to mirror the very favorable labor markets we had in the last decade and will more likely to resemble 2002-2012 period when the economy suffered from the Great Recession, when we witnessed unemployment rates reach to 10 percent and total employment dropping by 8.6 million in a two year span between December 2007 to end of 2009 and finishing the decade with netting only 4.6 million jobs.

Now we don’t have to have a deep recession and large job losses to end up with a dismal number as projected here. Instead, the report points out slow growth for working age population (age between 16-64) as the main catalyst which is projected to increase by only 0.2 percent annually compared to 0.3 percent that we had between 2012 and 2022. The lower growth of working age population is attributed to the remaining of the baby boomers aging out of the prime working age years as well as the continued shrinking of the younger age population (16 to 24) which started in the previous decade and is expected to continue in the next ten years.

BLS projects that labor force participation will fall to 60.4 percent in 2032 from its current levels of 62.8 percent with the main catalyst being a greater share of population (25.1 percent of all adults in 2032 compared to 21.5 percent in 2022) reaching the age over 65. Even though BLS projects that the participation within the older population will go up (turning around the post pandemic trend of declining participation in this group), the increase is not enough to make up for the fact that participation drops dramatically once people reach the retirement age.

For prime age workers, BLS has differing projections for men and women (See Chart 1). Women, ages 25-54, are projected to participate at a slightly higher rate at 76.7 percent in 2023 compared to 76.4 percent in 2022 which the report uses as baseline. However, participation reached that rate in March (12-month rolling average) and surpassed this projection and was at 77.1 percent in August. An increase in labor force participation among women is in line with overall historical trend and with BLS’ projections on where employment growth will be. BLS projects half of job growth will be concentrated in health care and social assistance, as the aging population will require more services, and more than three quarters of all workers in these sectors are women. The industry is recession proof with jobs are expected to be added even during a downturn and these jobs are less likely to be impacted by developments in AI and automation in near future.

Prime age men, ages 25-54, on the other hand, are projected to have lower labor force participation than now at 86.7 percent in 2032, a 2.3 ppts decline from its current levels. While participation among prime age men has been on a long term declining trend since 1954 with recessions hitting them harder, it started to gradually recover slightly since mid-2015 until the pandemic hit and reduced the participation rate to its all time low at 87.5 in March 2021 (12-month rolling average). However, it recovered since then and is now back to its prepandemic levels. We will have a better idea about BLS’ reasoning with such a negative outlook for prime age men once they publish more detailed information later in the month, but it is somewhat surprising that they are projecting the labor force participation will hit an all time low by 2032 for prime age men especially given recent recovery for the group.

Regarding the youth labor force participation, ages 16-24, BLS projects that the rate will decline by 4.3 ppts from 55.6 percent in 2022 to 51.3 percent in 2032 (see Chart 2), an all-time low significantly below even the height of the pandemic. This contrasts with the increase in participation rates in the last ten years for this group and more recently going back to its prepandemic levels of 56 percent in August but is more in line with a longer-term trend. Still, with college enrollment one of the main reasons that the younger population delays labor force participation and enrollment rates declining in the last decade, this is yet another surprising projection.

Chart 1: Labor force participation for prime age men is projected to hit all time low in 2032

Chart 2: Youth labor force participation is projected to decline significantly by 2032

Source: US Bureau of Labor Statistics                                                                                                      @ 2023 The Conference Board, Inc.