There’s a statistic making the rounds in the news and on social media from last Friday’s jobs report: out of the almost 1.1 million workers aged 20 and over that left the labor force in September, 80% were women (865k). The broad consensus regarding this development: childcare needs at home are pushing women out of the workforce.
Per our usual DataTrek style, let’s start by putting this data in historical context by comparing male versus female labor force participation (LFP, the percent of people working or unemployed relative to the adult population) over many cycles. First, here’s the data since 1948:
- Nearly doubled from post-WWII (32% in January 1948) to its peak of 60.3% in April 2000.
- Waned to 56.4% in September 2015, but rose thereafter to a high of 57.9% in January 2020.
- From January through September 2020, female LFP has lost 2.3 points.
Now, here is male LFP:
- Has been in structural decline since WWII, from 86.7% in January 1948 to a low of 68.7% in November 2015, excluding 2020.
- Has lost 1.8 points from this past January (69.4%) to September (67.6%).
Here’s a chart with both female and male LFP to illustrate this stark contrast. We’d also note that post-crisis:
- Female LFP is up 0.9 points from the low of 54.7% in April; it fell by 0.5 points from August to 55.6% in September.
- Male LFP is up 1.5 points from a low of 66.1% in April; it edged down by 0.1 point from August to 67.6% in September.
Takeaway: female labor force participation is down 0.5 points more than men since January through September. Male LFP is generally grinding higher from its post-crisis low, whereas female LFP is rolling over.
Why? A few thoughts:
#1: Women account for the majority of workers in industries with a disproportionate share of people voluntarily leaving their jobs in the latest crisis. For example:
- Women represented nearly three-fourths (74%) of workers in education and health services and over half (52%) of those in leisure and hospitality as of 2018, according to the BLS.
- Health services and education made up 15.4% of overall quits from March through August (latest available data).
- Leisure and hospitality accounted for almost a fifth (17.4%) of overall quits over the same 6 months.
Takeaway: the leisure/hospitality and education/health services industries are dominated by women and represent nearly a third (32.7%) of total quits during the first 6 months of the pandemic. Why this matters: people voluntarily leaving their jobs are automatically disqualified from receiving unemployment insurance, a policy tool to keep workers marginally attached to the labor force and provide income support.
#2: There could be many reasons as to why an increasing share of women are leaving the labor force, but we have anecdotal evidence of two strong and understandable factors highlighted in the Federal Reserve’s Beige Book Reports:
- A third of quits over the first six months of living in a pandemic occurred in customer-facing, service sector-oriented jobs (i.e. leisure/hospitality and health services/education as noted above). This makes sense given that these roles put workers at outsized risk of contracting the virus. Beige Books since April have supported this notion by continually reporting business contacts’ challenges of bringing workers back given their fear of getting sick.
- Employers have struggled to rehire employees amid more demanding child-care commitments, as expressed in September’s Beige Book: “Firms continued to experience difficulty finding necessary labor, a matter compounded by day care availability, as well as uncertainty over the coming school year.” To give one example, the report also noted that staffing contacts in Philadelphia “worried – as the school year neared – that childcare issues [would] further reduce the labor supply.”
Takeaway: the Beige Book’s three most frequently reported impediments to rehiring workers have included fear of infection, childcare needs and expanded unemployment insurance benefits (which have expired) since the pandemic hit. The former two issues remain with women seemingly impacted the most given their greater exit from the labor force since the crisis began.
To sum up, here’s what all this means for the macroeconomy overall: female involvement in the workforce has served as the largest determinant of overall participation for several decades, whereas male LFP has been in structural decline since WWII. While men are gaining more traction thus far off the lows of the current crisis, history shows they will likely at best revert back to the mean.
By contrast, female LFP was the biggest secular success story from WWII to 2000 when it peaked and was also the driver of the 2010 late cycle recovery in participation. The central issue to watch is progress in female LFP because that’s what has historically created increases in overall participation, and therefore plays a key role in the size of the US tax base and economic output of society.