Labor force participation falls to 61.5% as worker supply tightens
June’s participation rate hit the lowest non-pandemic level since 1976, with economists pointing to demographics, immigration and AI-driven job mismatches.
By Hana Yoshida · Markets Reporter
3 min read
The U.S. labor force participation rate fell to 61.5% in June, its lowest level apart from the pandemic period since 1976, Fortune reported. The drop matters because economists cited by Fortune say it may reflect a shrinking supply of available workers, not only weaker demand or discouraged job seekers.
Fortune reported that 720,000 people left the labor force in one month. Laura Ullrich, director of economics at Indeed Hiring Lab and a former Richmond Fed economist, told Fortune that monthly hiring weakness can now reflect two different pressures: employers may not need more workers, or they may want to hire but cannot find enough people.
Ullrich’s view draws on a May Indeed Hiring Lab report she co-authored, which projected that the U.S. labor force would begin contracting in 2026. According to that report, the decline is tied to tighter immigration policy and the retirement of baby boomers.
Demographics and immigration weigh on labor supply
Indeed Hiring Lab estimated that the labor force would shrink by about 3.7%, or 5.9 million workers, from 2025 to 2032 before recovering in part. The report also projected that the overall unemployment rate could rise by 0.5 to 3.5 percentage points by 2040, reaching nearly 8% in its more severe scenario.
Ullrich told Fortune that Bureau of Labor Statistics projections already point to lower participation over the next decade, and that those estimates were made before current immigration restrictions. She said future BLS projections could show steeper declines because immigrant workers are younger on average and participate in the labor force at higher rates.
BLS data cited by Fortune show a 66.3% labor force participation rate for foreign-born workers, compared with 61.6% for native-born workers. Among men, the rate was 76.9% for foreign-born workers and 65.8% for native-born workers; among women, native-born workers had higher participation, especially when compared with immigrant women with young children.
Age adds to the gap, according to the BLS figures cited by Fortune. About 70.1% of foreign-born people are ages 25 to 54, the prime working years, compared with 62.7% of native-born Americans.
AI may intensify job mismatches
Indeed Hiring Lab also examined how artificial intelligence could affect hiring through 2040. Fortune reported that the firm modeled one scenario in which AI eliminates many jobs and another in which it supports human work and creates new roles.
In the more disruptive AI scenario, Indeed projected that the combined unemployment rate in information, financial activities, and professional and business services would rise from 4% in 2025 to 12% by 2032. The report put the 2032 rate at 21.2% in information, 11.8% in financial activities, and 10.7% in professional and business services.
Ullrich told Fortune those sectors attract many younger workers and graduates, while fields with older workforces, including government, health care, education and construction, are not drawing enough new entrants. Fortune reported that Ullrich’s health care research found 39.2% of physicians in New Mexico are over 60, while the Indeed report said 68% of nurses entered nursing directly and 72% who leave a nursing job remain in the field.
Fortune also cited the Federal Reserve’s Survey of Household Economics and Decisionmaking, which shows 72% to 73% of adults have said they are at least doing okay financially over the past three years. Ullrich told Fortune that, across Indeed’s AI scenarios, demographics remained the larger force behind the labor market shift.
This story draws on original reporting from Fortune.