Participation Rate

Loading the player...

What is the 'Participation Rate'

The participation rate is a measure of the active portion of an economy's labor force. The 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 would 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.

BREAKING DOWN 'Participation Rate'

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.


The participation rate is important in analyzing the unemployment rate. 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 give a better understanding of the overall employment status.

RELATED TERMS
  1. Unemployment Rate

    The percentage of the total labor force that is unemployed but ...
  2. Unemployment

    Unemployment occurs when a person who is actively searching for ...
  3. Concealed Unemployment

    When people who are out of work are not counted in official unemployment ...
  4. Full Employment

    A situation in which all available labor resources are being ...
  5. Material Participation Test

    A set of criteria that determines whether a taxpayer is a material ...
  6. Disguised Unemployment

    Unemployment that does not affect aggregate output. Disguised ...
Related Articles
  1. Markets

    Explaining the Participation Rate

    The participation rate is the percentage of civilians who are either employed or unemployed and looking for a job.
  2. Markets

    U.S. Labor Participation Rate at Record Lows

    In absolute terms, labor participation hit an all-time low.
  3. Markets

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  4. Markets

    Understanding the Unemployment Rate

    The unemployment rate is the percentage of people in the labor force who are unemployed but seeking a job.
  5. Markets

    How The Unemployment Rate Affects Everybody

    Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate.
  6. Markets

    What "Unemployment" Really Means

    Unemployment occurs when a person who is actively searching for employment is unable to find work. The most frequently cited measure of unemployment is the unemployment rate. This is the number ...
  7. Markets

    Where Unemployment Hits Hardest

    A look at the demographics of unemployment, and what that means for workers around the nation.
  8. Markets

    Leading Economic Indicators: U.S. Bureau of Labor Monthly Stats

    The Bureau of Labor Statistics' monthly employment figures are a key economic indicator. Here's how they work.
  9. Markets

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  10. Retirement

    Is the Number of Workers in the U.S. Declining?

    The number of workers in the U.S. labor force is declining. What caused it and what is the solution?
RELATED FAQS
  1. What is the key difference between the participation rate and the unemployment rate?

    Learn the key differences between the participation rate and unemployment rate, and how taken together, they can provide ... Read Answer >>
  2. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    Understand the process used by the U.S. Bureau of Labor Statistics to determine the official unemployment rate for the United ... Read Answer >>
  3. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Discover whether rising unemployment rates tend to increase or decrease consumer confidence and investor sentiment. Unemployment ... Read Answer >>
  4. Is a person an active participant in an employer-sponsored retirement plan if he ...

    Yes. An individual is considered an active participant even if his or her participation in the plan has been for only a short ... Read Answer >>
  5. What are some of the key shortcomings of how the U.S. unemployment rate is determined ...

    Understand how the unemployment rate reported by the BLS fails to account for people who have given up looking for jobs or ... Read Answer >>
  6. What are my main rights as a 401(k) plan participant?

    Learn how under ERISA, 401(k) plan participants are guaranteed several important rights, including protections of their plan ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center