Not everyone counts. A retired teacher, a full-time student, and a parent staying home to raise children are not in the labor force. The labor force includes only people who are employed or actively looking for work. It is the pool from which employers hire, and its size and composition tell economists a lot about an economy's health.

The labor force participation rate measures the share of the working-age population that is in the labor force. In the United States, it hovered around 63 percent in the 2010s after peaking near 67 percent in the late 1990s. Japan's rate has risen as more women entered the workforce. Germany's has fallen slightly as the population ages. These differences reflect culture, policy, and demographics.

When the labor force shrinks, businesses struggle to fill openings. Wages rise, which can feed inflation. When it grows faster than job creation, unemployment climbs. Policymakers watch both the headline unemployment rate and the participation rate, because a falling unemployment rate can be misleading if people have simply given up looking for work and dropped out of the labor force entirely.

Who is counted

• Employed workers, full-time or part-time
• Unemployed workers actively seeking jobs
• Not counted: retirees, students, homemakers, discouraged workers
• Participation rate: labor force divided by working-age population