America’s workforce is shrinking. What’s going on? | The Excerpt

On the Wednesday, July 22, 2026, episode of The Excerpt podcast: The unemployment rate fell in June, but that may be because more people stopped looking for work—not because more found jobs. USA TODAY Money Reporter Rachel Barber explains who is leaving the labor force and why a shrinking workforce could slow the U.S. economy.

Hit play on the player below to hear the podcast and follow along with the transcript beneath it. This transcript was automatically generated, and then edited for clarity in its current form. There may be some differences between the audio and the text.

Podcasts: True crime, in-depth interviews and more USA TODAY podcasts right here

Dana Taylor:

The unemployment rate fell in June and normally that's good news, but economists are saying - not so fast. The US added just 57,000 jobs in June while previous months were revised down. Also, the labor force participation rate fell.

In other words, the job market may look steadier on paper than it really is. Hello and welcome to USA TODAY's The Excerpt. I'm Dana Taylor. Today is Wednesday, July 22nd, 2026. Here to dig into the numbers and explain what's really going on is USA TODAY Money Reporter Rachel Barber. It's so good to have you here, Rachel.

Rachel Barber:

Yes, thanks for having me, Dana.

Dana Taylor:

So let's start with the basic tension in this latest jobs report. The unemployment rate fell in June, but economists say that may have happened for the wrong reasons. Why?

Rachel Barber:

So the unemployment rate, if you break it down, is really just a function of how many people are unemployed that would like to be employed. And so what economists are saying is given the fact that the labor force participation rate fell, which the labor force participation rate is just a fancy way of saying the percent of people 16 and older who are looking for work or working, saying because that fell, the unemployment rate dropping from 4.3 to 4.2 percent is most likely more so a function of the fact that people have just stopped applying for jobs rather than the fact that a lot of people are getting hired. So that's a troubling sign in what would usually be considered a bright spot in this jobs report.

Dana Taylor:

Rachel, I mentioned that the US added just 57,000 jobs in June or previous months were revised down. Just how weak is that number?

Rachel Barber:

So when you compare it to other months this year, the US has added well over 100,000 jobs. In the prior three months, for example, we saw negative job growth or job losses in February, but every other month this year has been positive. But when you compare it back to 2025, for example, the US added only 181,000 jobs over the entire year.

So in a way, this is kind of on track or even a little bit of an improvement from the averages we saw last year, but also last year was a historically weak year for hiring in the United States. So kind of depends on your timeline, but for the most part, this is a weak print.

Dana Taylor:

There's an argument to be made that the economy may not need as many new jobs each month to keep unemployment stable, especially if immigration is slowed. If we follow that logic, does that make this report feel less alarming or is that too simple?

Rachel Barber:

I think that that's a valid point for economists to point out and they have. And I think overall, I would just say that this is just one month and this is an estimate that will be revised next month and the following month after that.

And Federal Reserve Chair Kevin Warsh, when he was recently testifying in front of the Senate, he also made that point saying that this is just one jobs report. We're going to need to see some more data to solidify this as a trend. But for now, just sort of one troubling sign, but we'll have to wait and get some more data in the next couple of months.

Dana Taylor:

When we say people are leaving the workforce, who exactly are we talking about?

Rachel Barber:

So that's the interesting thing is that for most age groups and most demographic groups, the labor force participation rate is down. It's not down for absolutely everyone, but generally it's down across the board. In particular, the labor force participation rate for older workers, those 55 and up fell to a 21-year low in June.

And so that is sort of the standout group. We've also seen women leave the workforce in sort of record numbers over the last couple of years. And we can get into some of the reasons why, but overall I think economists are a bit concerned that this isn't just something we're seeing in one specific group. We're seeing it in several groups.

Dana Taylor:

What are some of the reasons why?

Rachel Barber:

So there's probably as many reasons why you would leave the workforce as there are people leaving the workforce. It's a very personal decision obviously, but there are some trends that we can sort of pull out. The first is potentially as hiring processes have grown longer, people aren't doing fifth round, sixth round interviews, and maybe they get on and it's an AI agent interviewing them instead of a person. They're not hearing back. You can hear that if you talk to any job seeker today that it's kind of a rough time out there.

And so economists theorize that one reason could be that people are simply burned out, that they've tried really hard over the last year to get a job and that they have somehow given up. And we'll have to see how long that lasts because the obvious next question that follows is, well, then how are they affording their life if they've left the workforce? But that's one theory. The second theory is that this is still something that we're seeing as a result of the reject to return-to-office mandates that we saw as people came back from work after the COVID era. Last year in particular, companies really enforced those return to office mandates.

There's a survey from Catalyst earlier this year that found that a majority of women who left the workforce did so because of those return to office mandates. They might have children to take care of and they can't afford childcare. They might have ailing relatives or older relatives that need care. And as one of my sources said, obviously men could fill that role as well and be leaving the workforce for a similar reason. But as she said, if you're a couple or a husband and wife and you're trying to decide which parent is going to stay home, you're probably going to select the parent that makes less.

And because of the wage gap, that's often the woman. And then the third reason is the older workers that are either retiring or retiring early or maybe getting kicked out of the workforce for some reason. They are looking at their 401ks and because the stock market has been booming as of late, they're maybe sitting on a pile of cash and realizing, "Hey, what am I doing here? I can retire." And between that, health concerns.

Dana Taylor:

Rachel, there's another important nuance here. Labor force participation is actually up for workers ages 16 to 24. So where's the workforce decline showing up most clearly?

Rachel Barber:

So if you go just from 25 to 55, it's declined there. It's declined for workers 55 and older. And then if you look at specific demographic groups like women for instance, but also men, it has declined. So yes, we're seeing it rise for younger workers.

I mean, that's a piece of good news considering the sort of narrative out there that entry level workers are most at risk as we go through this period of AI adoption. But for whatever reason, maybe perhaps just because it's the summer or what, after they've graduated or maybe they have time and a break from school to work, we're seeing the 16 to 24 labor force participation rate rise. So but for most everyone else, it has declined.

Dana Taylor:

Do economists think this is a temporary response to current economic conditions or are there longer term demographic changes that could keep participation lower over the long term?

Rachel Barber:

So I think that's something that we have to wait and see, but there are theories out there. And the first is kind of an obvious one that the US has an aging population. We are seeing the baby boomers retire, this was expected. The other piece of this is lower immigration. Given the Trump administration's crackdown on immigration, we have seen lower both undocumented and legal immigration to the United States that could be playing a part and a myriad of other things as well.

But what actually sort of matters for the US economy is that this could affect potential economic growth in the United States going forward. So let me break that down a little bit. US economic growth is a function of two things. It's a function of how many workers are working how many hours and how productive are those workers being when they're working those hours? And there's been lots of talk of a productivity boom in the United States as of late, whether we've seen the heights of it already or if we're going to see much more as companies continue to adopt AI.

There's a lot of promises around how AI is going to increase productivity in the US. We don't know, time will tell. But for the most part, the productivity half of that has been pretty good, pretty stable, pretty okay. The other half of that, like I said, is how many workers are working how many hours? And simply put, if you have fewer workers working fewer hours, that's expected to slow US economic growth. So that could be a problem or sort of a worrying sign for economists.

Dana Taylor:

If the workforce really is shrinking, what does that mean for the broader economy, for growth, wages and inflation?

Rachel Barber:

It could be a troubling sign for growth. When it comes to wages or inflation, it doesn't have a direct effect on those two things, but we can certainly talk about inflation. It fell to 3.5% in June down from 4.2% the month before. That's another sort of positive sign for the US economy. However, it's still well above the Fed's 2% target.

And if you look at the reasons why it fell, it wasn't only because of this, but one of the driving forces was that temporary ceasefire between the US and Iran. The war has pushed up gas prices as the oil market got disrupted by blockades in the Strait of Hormuz. And we had this sort of sweet stretch in June where there was less fighting, there were more ships managing to navigate the Strait, there was more oil supply. So we saw gas prices go down. Now with renewed hostilities, we're seeing gas prices go back up.

Dana Taylor:

Rachel, how much should we rely on one month of BLS data here? These numbers are estimates and we've seen they can be revised. So what should we watch for in the next jobs report?

Rachel Barber:

In the next jobs report, we should obviously look at the headline number just to see is it going to be higher than 57,000? Is it going to be well over 100,000 again? Are we going to get back to that? In general, where is the hiring? Hiring has been heavily concentrated in sectors like healthcare, social assistance, private education over the last year or so. And we want to see it broaden out into other sectors. We've seen that a bit over the last couple of months, but we'd like to see that continue. Just for a healthy labor market, that's a good sign.

And then I think in general, I think the BLS would tell you not to trust just one month's report. Every month the jobs report comes out, they include revisions for the prior two months. So yes, we have to wait to see what the revisions tell us. But at the same time, the BLS jobs report is still the gold standard for labor market information. It's what the Federal Reserve relies on and what economists look to to sort of get a gauge. It is a very difficult task to measure every single month how many people left the workforce, how many people were hired in each industry.

They use different surveys to come up with these numbers and those surveys have had lagging participation rates over the last couple of years. They still rely on phone calls. A lot of people don't want to pick up the phone anymore because they think it's going to be a scam call. These are the actual troubles and challenges that the BLS faces that Chair Kevin Warsh has put forward and created a task force to reexamine the data that the Fed uses to inform its interest rate decisions because he feels that this sort of methodology could use an update.

We are in an evolving economy that's sort of ever-changing. And every year we get revisions and every month we get revisions. That's not a reason to say that we can't trust the data. It's just a reason to sort of take things with a grain of salt and wait for the final numbers. But that can be a challenge sometimes. Sometimes you just want to know right away what's going on. So they're working on it to try and improve the process.

Dana Taylor:

Rachel Barber is a money reporter for USA TODAY. Great to have you back on The Excerpt, Rachel.

Rachel Barber:

Thank you.

Dana Taylor:

Thanks for listening to USA TODAY's The Excerpt. I'm Dana Taylor. Our stories come from USA TODAY journalists across the country. Be back tomorrow with a deeper look into a story that matters.