What drives structural changes in the labor market
Structural changes tied to fundamental shifts that affect how work is done often influence labor market trends. For instance, in the past, there was a structural shift from agricultural work to factory work as society became more industrialized. More recently, technology advances sparked an upturn in jobs tied to technology, or jobs that use technology to complete tasks. Today, many economists expect artificial intelligence (AI) advances to again create structural labor market changes and expand productivity. This could affect the types of jobs available and labor supply trends.
Demographics, participation and workforce availability
Labor force participation, a measure of the share of the population working or actively seeking work, has declined from its previous peaks. This decline is due in large part to workforce demographics, specifically the nation’s aging population and immigration changes. According to U.S. Bureau of Labor Statistics data, the labor force participation rate peaked at 67.2% in 2001 and now stands below 62%. Nearly one-quarter of the nation’s workforce is age 55 or older, and the “exit rate” due to retirement outpaces the entry rate of younger generations.
Technology, productivity and shifting skill demand
Technological advancements often create anxiety about the labor market impact. Technology and job requirements are constantly changing. Recent artificial intelligence advancements make this issue even more topical. In previous periods, technological advancements often involved automation replacing certain physical tasks. Today, AI may augment cognitive tasks, possibly changing skill demand in the economy.