Lagging Labor Force Participation in Maryland and Virginia

By July 2022, the U.S. had officially regained the jobs lost in the pandemic, the unemployment rate matched its pre-pandemic low, and the size of the labor force (the sum of employed and unemployed looking for work) was almost back to its pre-pandemic level. The same was true for many states in the Fifth District. Maryland, Virginia, and West Virginia had recovered nearly all the jobs lost in February and March of 2020, while North and South Carolina had more than fully recovered. Unemployment rates were at or below pre-pandemic rates across much of the Fifth District as well.

One labor market indicator, however, is still lagging. The labor force participation rate, which is the labor force divided by the noninstitutionalized population aged 16 and over, has not recovered to its pre-pandemic rate. Even though the labor force has grown over the last couple of years, it hasn't kept up with population growth; therefore there is a larger portion of the population on the sidelines of the labor market now compared to February 2020. This post explores some additional data to see who, exactly, is not participating in the states that are lagging.

Labor Force Participation

Two states in the Fifth District that have seen labor force participation recover much slower than the U.S. are Maryland and Virginia. Similar to the U.S., both states saw steep declines in labor force participation in the first several months of the pandemic. Although the U.S. participation rate started to recover in the summer of 2020, while the Maryland and Virginia participation rates continued to decline and then flattened.

With a growing population, the above chart suggests that the declines in the participation rates are largely because people have left the labor force. The chart below shows that labor force participation in Virginia is still down about 2.6 percent since February 2020 and down about 4.8 percent in Maryland. (Compare this to the U.S. labor force, which is only 0.4 percent lower than in February 2020.) This begs the question, who has left the labor force in these two states? And what is the likelihood that they will return?

Digging Deeper

The Bureau of Labor Statistics annually publishes data that disaggregate the state-level labor force by age, race, and gender. The 2019 and 2021 data provide insight into who left the labor force during the pandemic. For example, the data show considerable differences across gender between Maryland and Virginia. In Maryland, the male labor force participation rate declined 1.9 percentage points from 2019 to 2021, while the female rate declined a staggering 5.3 percentage points. In Virginia, the rate for men declined 5.1 percentage points, while the female rate only declined 0.3 percentage points. There were approximately 98,000 fewer women in the labor force in Maryland in 2021 than in 2019 and about 126,000 fewer men in the labor force in Virginia.

In Maryland, female labor force participation declined across every age range except for women ages 55 to 64. (See chart below.) The largest decline of 6.8 percentage points was among women ages 45 to 54. That decline corresponds to almost 68,000 fewer women between the ages of 45 and 54 in the Maryland workforce. Participation among married women declined 6.1 percentage points, or by about 73,000 women. (Data are not currently available for women 65 and over due to data suppressions.)

The chart above shows that there was no change in the participation rate among women 55 to 64 years old, however, the population for that age group increased 7.2 percent from 2019 to 2021. So although the participation rate was unchanged, there were actually 22,000 more women between the ages of 55 and 64 in Maryland's labor force in 2021.

In Virginia, the largest decline for male participation, by far, was among men over 65 years old. (See chart below.) For that group, the decline was 10.8 percentage points. Even with a very low participation rate among that group to start with (just 32.8 percent in 2019), the decline equates to 52,000 men. Similar to married women in Maryland, participation among married men in Virginia fell considerably. For that group, the 5.2 percentage point decline in the participation rate equates to 88,000 men.

Conclusion

Labor force participation in both Maryland and Virginia is down considerably from their respective pre-pandemic rates but for different reasons. In Maryland, it is women, particularly women who would be considered still in their prime working age, who are largely missing from the workforce. In contrast, men over 65 in Virginia have fallen out of the labor force in the largest numbers from 2019 to 2021.

These differences are important not only because they help us better understand the employment recovery, but they might also highlight the need for different policy interventions. Policies like maternity leave or childcare to help women reengage with the labor force, for example, could have a slightly larger impact in Maryland. Similarly, policies that make it easier for older people to work longer, or that draw younger folks if we think the older population isn't coming back, could have a larger impact in Virginia.