In recent years, discussions around the slowing growth rate of the U.S. labor force have intensified. Rob Fox from CoBank highlights a pressing issue in the company’s latest quarterly report: the potential drag on economic growth due to labor supply constraint.
While the urgency of the problem seemed to subside temporarily, recent developments have brought it back into focus.
Demographic Challenges
Eighteen years ago, the U.S. boasted a fertility rate of 2.12 children per woman, surpassing the level necessary for a stable population. However, the economic upheaval caused by the Great Financial Crisis led to a significant decline in births, a trend that continues to this day. The fertility rate as of 2023 has dropped to 1.62 children per woman. The impact of these “missing births” is now becoming evident as this age cohort begins entering adulthood, coinciding with the retirement of the baby boomer generation. This demographic shift presents a dual blow to the labor market.
Fox says adopting technology — most obviously AI and robotics — will likely be at the core of any strategy to address oncoming labor shortages.
Participation Rates
Another pressing issue is the downward trend in labor force participation rates since 2000. Currently at 62%, a stark decline from the peak of 67%, this translates to approximately 9.7 million potential workers lost.
“Worryingly, this trend may be accelerating: 2.4 million working-aged people have dropped out of the labor force in the past eight months alone,” Fox says, noting some reasons include increased caregiving responsibilities, job skill obsolescence, mental health challenges and rising disability rates.
Immigration as a Balancing Act
For a brief period, immigration helped offset the labor shortage. Humanitarian crises, less restrictive immigration policies, and strong labor demand attracted nearly 9 million immigrants to the U.S. between 2022 and 2024. However, since late 2024, immigration levels have sharply declined. Additionally, the Trump administration’s plan to deport 1 million undocumented immigrants further complicates the scenario. Without a reversal in participation rates or policy changes, the worker pool will continue to shrink.
Agricultural Implication
These labor issues are particularly acute in rural areas, affecting industries like agriculture. Richard Stup from Cornell Cooperative Extension underscores the diminishing labor pool available for farm work. Countries like Mexico — historically a source of agricultural labor — are experiencing similar demographic changes. Economic improvements in these countries reduce the impetus for migration, further tightening labor availability.
“[The population in] Mexico, going forward, will begin to actually shrink,” he says. “It’s not just Mexico. There are a lot of countries in this situation.”
In addition to a smaller pool of workers willing to fill on-farm vacancies, economic opportunities in these countries — such as an increase in Mexico’s inflation-adjusted dollars — are reducing the push factor for migration.
“It means there’s more economic activity, there’s more job opportunity and there’s less push to leave Mexico and go to the U.S. for dollars,” he says. “There’s still a lot of push to come up here, but it’s not what it used to be.”
When looking at the data, Stup notes fewer young people are looking for work.
“The average age of foreign-born employees is about 42 years,” he says. For comparison, the average age of U.S. born employees on farms is 36 years old.
Stup says technology will be used in places where the work is repetitive and heavy manual labor. He also underscores the need for retention programs and attracting a diverse pool of workers. Skills such as critical and systems thinking, data savviness and comfort with animals will be essential for future dairy workers. Education, whether formal or through on-the-job training, is equally important.
The decreasing labor supply poses significant challenges that could hinder U.S. economic growth if not addressed. Without strategic interventions in demographic policies, a shift in immigration approaches, or incentives to boost labor participation, the labor market’s stability remains at risk.
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