Labor force participation falls to 61.5%, the lowest in 50 years outside COVID, and economists say it’s not just people giving up
July 8, 2026, 5:05 PM ET
Economists have spent the past week arguing about why 720,000 people walked away from the labor force in a single month. Laura Ullrich, director of economics at Indeed Hiring Lab and a former Richmond Fed economist, says that rather than treating June’s slide to a 61.5% labor force participation rate—the lowest reading outside the pandemic since 1976—as a story about discouraged workers giving up, it’s actually about supply: There simply aren’t enough workers left to fill the jobs employers have.
“Historically, you’ve been able to look at jobs numbers like what came out on Friday and say, ‘okay, there was a decline in leisure and hospitality. Well, that means there’s less demand for those workers,'” Ullrich told Fortune. “But I think now, and more commonly as we go forward, it actually could be labor supply driving some of that. There are two reasons why you might not add jobs in a month: One is there’s no demand for workers, the other is there is demand, but there’s not enough supply.”
Ullrich co-authored a May report from Indeed Hiring Lab, “The Great Mismatch: How a Shrinking Workforce, AI, and Labor Reallocation Will Define the Next 15 Years,” projecting the labor force would begin shrinking in 2026. The finding was particularly driven by a combination of immigration policy changes and what Ullrich calls “the demographic cliff”—the accelerating retirement of the baby boomer generation. The report estimates the labor force will decline by roughly 3.7%, or 5.9 million workers, between 2025 and 2032, before partially recovering. It also projects the aggregate unemployment rate could climb by 0.5 to 3.5 percentage points by 2040, to nearly 8% in the more severe scenario.
“When we first ran the numbers and saw that we were actually predicting the labor force was going to start declining this year, I was like, ‘oh gosh, I don’t know,'” Ullrich said. Around the same time, then-Fed Chair Jerome Powell told reporters the economy was seeing “very, very low, nonexistent, really” growth in the labor force. “I was like, okay, I think we are here with the demographic changes and the share of baby boomers that are leaving the workforce.”
The Bureau of Labor Statistics’ own 10-year projections already point to declining participation, Ullrich said, and those projections predate the current immigration restrictions.
https://fortune.com/2026/07/08/labor-fo ... available/