The labor force participation rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work are not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment. As a result, the participation rate decreases, sometimes causing the unemployment rate to fall as well. For the U.S., this statistic is reflected in the employment situation report.
The participation rate is an important metric to note when looking at unemployment data because unemployment figures reflect the number of people who are looking for jobs but are unable to secure employment.
Those who have no interest in working are not included in the participation rate but are included in the unemployment rate. An aging population can have both a positive and negative effect on the participation rate, through retirement and new people entering the workforce. The participation rate and unemployment data should be observed in tandem to get a better understanding of the overall employment status.
Typically “working-age persons” is defined as people between the ages of 16-64. People in those age groups who are not counted as participating in the labor force are typically students, homemakers, and persons under the age of 64 who are retired.