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International Monetary Fund. Western Hemisphere Dept.

Labor Statistics, Haver Analytics and IMF staff calculations Note: The total LFPR change equals the sum of the population shift, the participation shift, and the interaction term (cf. Annex I). Table 2. Shift Share Analysis: Deviations from Base Year Men Women 2007-10 2010-13 2007-10 2010-13 Total LFPR Change −2.0 −1.5 −0.7 −1.4 Pop. Shift 16-24 −0.1 0.0 0.0 0.0 Pop. Shift 25-54 −1.4 −2.1 −1.2 −1.3 Pop. Shift 55-64 0.7 0.6 0.6 0.5 Pop. Shift 65+ 0

Mr. Ravi Balakrishnan, Mai Dao, Mr. Juan Sole, and Jeremy Zook
The U.S. labor force participation rate (LFPR) fell dramatically following the Great Recession and has yet to start recovering. A key question is how much of the post-2007 decline is reversible, something which is central to the policy debate. The key finding of this paper is that while around ¼–? of the post-2007 decline is reversible, the LFPR will continue to decline given population aging. This paper’s measure of the “employment gap” also suggests that labor market slack remains and will only decline gradually, pointing to a still important role for stimulative macro-economic policies to help reach full employment. In addition, given the continued downward pressure on the LFPR, labor supply measures will be an essential component of the strategy to boost potential growth. Finally, stimulative macroeconomic and labor supply policies should also help reduce the scope for further hysteresis effects to develop (e.g., loss of skills, discouragement).
International Monetary Fund. Western Hemisphere Dept.

); and Niklas Westelius (SPR). Contents RECENT US LABOR FORCE PARTICIPATION DYNAMICS: REVERSIBLE OR NOT? A. Introduction B. Population Aging and the “Demographic Effect” C. Estimating the “Cyclical Effect” Using State Level Data D. Youths, SSDI, and Older Workers E. LFPR Forecasts and Slack Measures F. Conclusions and Policy Implications TABLES 1. Shift Share Analysis: Deviations from Base Year (a) 2. Shift Share Analysis: Deviations from Base Year (b) 3. State Level Regression Results 4. Decomposition of Aggregate LFPR Change

Mr. Ravi Balakrishnan, Mai Dao, Mr. Juan Sole, and Jeremy Zook

. For women, the young abandoned the labor force in 2007–10, whereas during 2010–13 middle aged and older workers started leaving. Table 2. Shift Share Analysis: Deviations from Base Year Total Population Total LFPR Change Population Shift Participation Shift 2007-10 −1.3 −0.6 −0.8 2010-13 −1.5 −0.8 −0.7 Men 2007-10 −2.0 −0.6 −1.5 2010-13 −1.5 −1.0 −0.4 Women 2007-10 −0.7 −0.5 −0.2 2010-13 −1.4 −0.6 −0.8 Sources: U.S. Bureau of Labor

to forecast future participation trends. 3 Results In this section, we discuss the findings from the three empirical exercises in the paper (i) the quantification of the role of aging and cyclical effects in LFPR changes since 2008, (ii) the estimation of age and cohort effects across 17 advanced economies, and (iii) projections of LFPR through the middle of the century along with illustrative scenarios. 3.1 The Role of Aging and Cyclical Effects Figure 4 shows the average role of aging and cyclical effects in LFPR changes since the demo

International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper on the United States of America examines the recent US labor force penetration rate (LFPR) dynamics. LFPR dynamics can be driven by structural factors and cyclical ones related to job prospects. With participation rates for older workers lower than for prime age workers, demographic models suggest that aging of the baby boom generation explains about 50 percent of the near 3p.p. LFPR decline during 2007–2013. State-level panel regression analysis is used to tie down the cyclical effect, which is estimated to account for about 30–40 percent of the decline. Significant remaining slack in the labor market points to an important role for macroeconomic and labor supply policies. This suggests a still important role for stimulative macroeconomic policies to help reach full employment. Macroeconomic policy should remain accommodative for a while given sizeable labor market slack. This slack goes beyond that signaled by the unemployment rate and takes account of the LFPR being below trend and many employees working part time ‘involuntarily’.
Mr. Francesco Grigoli, Zsoka Koczan, and Petia Topalova
Advanced economies are in the midst of a major demographic transition, with the number of elderly rising precipitously relative to the working-age population. Yet, despite the acceleration in demographic shifts in the past decade, advanced economies experienced markedly different trajectories in overall labor force participation rates and the workforce attachment of men and women. Using a cohort-based model of labor force participation for 17 advanced economies estimated over the 1985-2016 period, we document a significant role of common patterns of participation over the life cycle and shifts in these patterns across generations for aggregate labor supply, especially in the case of women. The entry of new cohorts of women led to upward shifts in the age participation prole, boosting aggregate participation rates. However, this process plateaued in most advanced economies, with signs of reversal in some. Using the model's results to forecast future participation trends, we project sizable declines in aggregate participation rates over the next three decades due to the aging of the population. Illustrative simulations show that implementing policies encouraging labor supply can help attenuate but may not fully offset demographic pressures.
International Monetary Fund. Asia and Pacific Dept

on the national variable and a constant. This allows us to focus on labor market responses to local level disturbances. Table III.1. Individual Unit Root Test: ADF Test with AIC Change in employment Employment rate Change in employment rate LFPR Change in LFPR NSW X Y Y Y VIC X Y Y Y QLD X Y X Y SA X Y X Y WA X Y X Y TAS Y X X Y Rejection of null: unit root at 5% Sample: 1979 - 2015 (annual

Mr. Adil Mohommad
Labor markets in Australia have adjusted smoothly to significant declines in commodity prices with little increase in unemployment. This paper examines several aspects of the adjustment, focusing on (i) evidence of increased labor market frictions following the commodity price decline; (ii) flexibility in labor input adjustment in response to demand shocks; (iii) changes in labor productivity in the wake of resource reallocation with the decline in mining investment, (iv) and the role of migration in adjusting to the commodity price and mining investment cycle. We find little evidence of increased labor market frictions with the decline in commodity prices. The relatively smooth transition has been assisted by increased flexibility in adjustment of worker hours over time. Labor productivity growth has sustained its historical average through the transition, despite some temporary drag as the economy rebalances. Finally, migration has played a key role in labor market adjustment through the commodity cycle.
Mr. Ranil M Salgado

constant age-gender-specific labor force participation rates (LFPRs). However, LFPRs change over time and can be affected by policies. For example, increases in life expectancy could encourage the elderly to stay in the workforce. Indeed, in most Organisation for Economic Co-operation and Development (OECD) countries, the effective retirement age has increased, even though these increases have been modest compared to the larger increases in life expectancy ( Bloom, Canning, and Fink 2010 ). Alternatively, the decline in fertility rates could encourage women to