Housing stands in an area of the South Bronx experiencing an epidemic in drug use, especially heroin and other opioid based drugs. Photo: Spencer Platt/Getty Images

The opioid crisis tearing through communities across America has kept working-age men and women out of the labor force at a rate that is hurting the national economy, according to Federal Reserve Chairman Jerome Powell.

Why it matters: Labor force participation is used to calculate the unemployment rate released by the federal government each month, with people not considered to be in the workforce — including those incapacitated by addiction — left out of the overall percentage. Per CNBC, this could present "a potentially skewed picture of the employment situation."

By the numbers: Appearing in front of the Senate Banking Committee Tuesday, Chairman Powell cited a 2017 study by Princeton economist Alan Krueger, which suggested the increase in opioid prescriptions from 1999 to 2015 could partially account for the observable decline in labor participation during that same period.

  • Between early 2000 and 2015, the LFP rate dropped from 67.3% to a 40-year low of 62.4%.
  • 40% of prime age men (25 to 54 years old) not in the labor force report taking pain medication on a daily basis. Two-thirds of that group report taking prescription pain medication on a daily basis.
  • Krueger attributes about half of the decline in LFP to shifting demographics, meaning the population of working age Americans is simply getting older.
  • But his analysis also suggests that the increase in opioid prescriptions could account for 20% of the observed decline in LFP for men and 25% for women.

The bottom line: In the last 15 years, the LFP rate fell more in counties where more opioids were prescribed.

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