What is the employment-population ratio?

The employment-population ratio (EPOP) is the percentage of the civilian noninstitutional population aged 16 and older that is currently employed. It is calculated simply as the number of employed people divided by the working-age population. Unlike the unemployment rate, which only counts people actively seeking work, EPOP captures the full picture by including discouraged workers, early retirees, and others who have left the labor force entirely.

This distinction makes EPOP particularly valuable during periods of unusual labor force dynamics. During the COVID-19 pandemic, the unemployment rate fell rapidly from its peak of 14.7% in April 2020, but much of the decline reflected people leaving the labor force rather than finding jobs. The employment-population ratio, by contrast, showed a slower, more honest recovery because it was not flattering by shrinking denominators. Similarly, EPOP reveals the long-term structural decline in labor utilization caused by population aging, as retiring baby boomers reduce the ratio even when the job market is healthy.

Economists often focus on the "prime-age" EPOP (ages 25-54) to strip out the effects of younger people staying in school longer and older workers retiring. The prime-age EPOP peaked at 80.3% in April 2000 and did not fully recover after either the 2001 or 2008 recessions for over a decade. Its recovery to 80.8% in 2023 and 2024 suggested the post-pandemic labor market was genuinely tight, not just statistically tight due to participation effects.

For policymakers, EPOP provides a reality check on the unemployment rate. A 3.5% unemployment rate with a 60% EPOP tells a different story than a 3.5% unemployment rate with a 64% EPOP. The Fed watches both measures, but EPOP is especially useful for assessing how much slack remains in the labor market, since it accounts for the pool of potential workers who might be drawn back into employment if conditions are attractive enough.