February 13, 2012

Labor Force Growth Slows, Hispanic Share Grows

Hispanics will account for three-quarters of the growth in the nation’s labor force from 2010 to 2020, according to new projections from the Bureau of Labor Statistics (BLS). One major reason is that the Hispanic population is growing rapidly due to births and immigration. At the same time, the aging of the non-Hispanic white population is expected to reduce their numbers in the labor force.

A second important factor is that Hispanics have a higher labor force participation rate than other groups. The nation’s labor force participation rate—that is, the share of the population ages 16 and older either employed or looking for work—was 64.7% in 2010. Among Hispanics, the rate was 67.5%. There are two main explanations for this gap: Hispanics are a younger population than other groups, and include a higher share of immigrants.

The figures for Hispanics come from the latest round of BLS projections for the U.S. labor force, covering 2010-2020, which indicate that growth will slow overall. These projections show that the labor force will increase by 10.5 million in this decade, growing to 164.4 million in 2020 from 153.9 million in 2010. That is less than the increase of 11.3 million from 2000 to 2010, and substantially less than the 16.7 million increase from 1990 to 2000. The projected average annual increase in the labor force from 2010 to 2020—0.7%—is also less than the annual growth of 0.8% from 2000 to 2010 and only about half the 1.3% annual rate of growth from 1990 to 2000.

Reasons for Slower Growth

Why is labor force growth projected to diminish? The main reason is a reduction in the share of people in the labor force. From 1948 to 2000, the U.S. labor force grew faster than the population (1948 is the year the government first started reporting these statistics). This was mainly because a rising share of women went to work. Their labor force participation rate nearly doubled from 32.7% in 1948 to 59.9% in 2000.

The 2000-2010 decade was the first decade since the 1950s when the growth in the labor force (7.9%) was less than the growth in the working-age population (11.9%). The BLS projects that this trend will continue through 2020: The labor force will increase 6.8% and the population will increase 10.6% over the decade.

The movement of women into the workplace is no longer the tailwind behind the growth in the labor force.  The female labor force participation rate peaked at 60% in 1999 and has diminished slightly this century. Meanwhile, other economic and demographic forces have emerged to dampen labor force growth.

Economically, the recessions in 2001 and 2007-2009 pulled down the labor force participation rate by generally frustrating people’s efforts to find work. Demographically, baby boomers—the giant generation born between 1946 and 1964—are now entering their retirement years. People ages 55 and older are much less likely to participate in the labor force than people ages 25 to 54, so the overall aging of the U.S. population also will slow the growth of the labor force.

Growing Role for Hispanics

As the population and the labor force age, they are also becoming more racially and ethnically diverse, and Hispanics play a more important role. The share of the labor force that is Hispanic is projected to increase from 14.8% in 2010 to 18.6% in 2020. That is partly due to the relative youth and higher growth rate of the Hispanic population and partly due to the aging of the non-Hispanic white population and projected decline in its labor force. From 2010 to 2020, Hispanics are expected to add 7.7 million workers to the labor force while the number of non-Hispanic whites in the labor force is projected to decrease by 1.6 million.

Consequently, Hispanics will account for the vast majority—74%—of the 10.5 million workers added to the labor force from 2010 to 2020. That share is higher than in the previous two decades. Hispanics accounted for 36% of the total increase in the labor force from 1990 to 2000 and for 54% from 2000 to 2010.

Immigration Projection Uncertainty

It is possible that the growth in the labor force from 2010 to 2020 will be less than anticipated by the BLS. The BLS projections assume that immigration will add 1.5 million people a year to the U.S. population. That is at the high end of the range of projections made by the Census Bureau for growth in the foreign-born population. At the low end, the Census Bureau projects an average annual increase of 1.2 million from 2010 to 2020. Also, the actual increase in the foreign-born population from 2000 to 2010 was slightly less than 1 million annually. Thus, the BLS projections assume a significant uptick in immigration from 2010 to 2020. If that does not come to pass, the actual growth in the U.S. population and labor force could be well below the projected increase.

Because the majority of the adult Hispanic population is foreign born, lessened immigration would drag down the growth of the Hispanic labor force. Thus, if the BLS projections about immigration are too high, so may be the agency’s projections for the Hispanic share of labor force growth.

What are the sorts of jobs that await workers in the coming decade? Overall, the BLS expects non-farm jobs to grow by 19.7 million from 2010 to 2020. The greatest number of new jobs will be in health care and social assistance (5.6 million more jobs), professional and business services (3.8 million) and construction (1.8 million). Job losses are expected to emerge from the manufacturing and federal government sectors. College education will become more valuable. In number, most new jobs will not require post-secondary education. However, the relative importance of these low-skill jobs will diminish because the fastest growth in employment is projected in occupations that do require post-secondary education. The highest rate of employment growth is expected in occupations that typically require a master’s degree.