Powell tells students to be optimistic about the U.S. job market and AI
U.S. Federal Reserve Chairman Jerome Powell told Harvard Economics students on Monday (March 30) that he is optimistic about the medium- to long-term employment prospects for U.S. college graduates, despite the current period of very low job creation because the U.S. economy is the most dynamic and productive in the world.
Whether it’s caregiving responsibilities, disappointment after a long period of unemployment, or the realization that they’re sitting on too much money, many Americans have dropped out of the workforce altogether.
Approximately 1 million workers have left the workforce in the past year. According to estimates from the Labor Department, 720,000 people left their jobs in June alone. The labor force participation rate, or the percentage of people 16 and older who are working or looking for work, fell to 61.5% in June, the lowest level since March 2021. This rate is the lowest in 50 years, excluding the lowest seen during the COVID-19 pandemic.
Expert opinion is divided as to what is causing the withdrawal.
While some older employees who have benefited from the stock market boom may be happy with their 401(k)s and retire, that doesn’t explain why participation rates among employees between the ages of 25 and 55 are declining. A Catalyst study earlier this year found that some women left the workforce when companies required them to return to the office and needed to stay home to care for children, but that doesn’t explain why participation rates among men also declined.
What is clear is that a continued decline in the workforce could slow U.S. economic growth.
“Economic growth is a combination of the economy producing more for every hour that workers work, and more workers working more hours,” said Bill Adams, chief U.S. economist at Comerica Bank. “In the United States, the first part of that, productivity, is still growing at a good pace, but the second part, bringing more workers into the economy, is not contributing to growth as much as in the past.”
What a shrinking labor force means for unemployment
The unemployment rate fell to 4.2% from 4.3% in June. This may be a bright spot amid employment statistics that fell short of employment forecasters’ expectations. But Daniel Chao, Glassdoor’s chief economist, said in a note after the report was released that the decline was for “the wrong reasons.”
Mr. Zhao said that while U.S. employers have been hiring at an accelerated rate in the past few months, the unemployment rate is falling not because more people are being hired, but because fewer people are looking for work.
“This shows that despite recent optimism, the labor market stubbornly refuses to reaccelerate,” Zhao said in a note.
Some workers are experiencing burnout while searching for jobs.
After a year of historic employment declines in 2025, ZipRecruiter economist Nicole Beshaw told USA TODAY that long-term unemployed workers may become discouraged and leave the market altogether.
“If you were unemployed a year ago when it was really, really hard to find a job, you’re more likely to be unemployed now,” Bashaw said, adding that employers may prefer to hire “people who just recently left a job or are still in another job.”
Michelle Evermore, senior fellow at the National Employment Law Project, agreed. She said that after several rounds of interviews, rejection becomes painful, making finding a job “a real headache” by 2026.
“When you see people becoming depressed and not wanting to work, it’s worth thinking about,” he said, adding that he feels employers’ expectations are changing amid the growth of artificial intelligence, and people may take longer to learn new skills, learn a trade or go back to school this year.
Some employees refuse the obligation to return to the office
Jasmine Tucker, deputy director of research at the National Women’s Law Center, said the requirement to return to work in the face of high care costs unfairly pushes women out of the workforce.
“If a family is trying to make ends meet and someone has to leave the workforce because they can’t pay for care, it’s that person who will earn less, and because of the pay gap, women tend to do that,” Tucker said.
Evermore added that the return-to-office mandate may have made it harder for employees with disabilities to keep their jobs, which may also be contributing to the attrition workforce.
“There are a lot of jobs that you could probably continue to do from home, but in some cases employers are taking this kind of hard line,” Evermore said.
For some, it’s time to leave
The participation rate for employees 55 and older fell to 37.1% in June, the lowest level in 21 years.
“In addition to retirement, the stock market will be booming in 2026, so many older Americans with 401(k)s and other retirement savings feel comfortable leaving the workforce,” Adams said.
Evermore added that even if older employees don’t have ample retirement savings, their health can sometimes inform them when it’s time to retire after decades in the workforce.
“More and more people believe that the decision to retire is completely up to them, and in many cases it’s up to their body,” Evermore said.
Given the aging population, a wave of retirements is expected, but in the long term, Adams said, “the United States is going to have to figure out how to deal with the shortage of workers affected by these demographic changes.”
Contact Rachel Barber rbarber@usatoday.comFollow her on X @rachelbarber_and subscribe to her newsletter Making More of Your Money here.
