It appears that "Labor Participation" rates use data generated by companies that are collecting taxes from their employees. 1099 contractors don't seem to be represented in this mix as most of the contractors I know work on their own and report taxes annually. Therefore, they would not be reflected in the numbers on a monthly basis.
I did not see a definition of "employed" in the FRED data, so maybe I'm wrong. Based on what I've read though, "employed" means "wage" or "salaried" worker.
"to provide with a job that pays wages or a salary"
to make use of (someone or something inactive); to use (something, such as time) advantageously; to use or engage the services of… See the full definition
www.merriam-webster.com
A lot of people I know that were laid off, or under-employed, went out on their own as sole proprietors - quite a few. And they are making more money than before, but only pay taxes annually as they are under the threshold for quarterly or monthly. Also, they seem to be happier and have more free time.
That's just what I'm seeing.
Graph and download economic data for Labor Force Participation Rate for South Carolina (LBSNSA45) from Jan 1976 to Apr 2024 about participation, SC, labor force, labor, rate, and USA.
fred.stlouisfed.org
About half way down the page: "A state's labor-force participation rate is the number of all employed and unemployed workers divided against the state's civilian population."
So based on this definiton, it's based on wage reports and salary reports. Not 1099 info, like from Uber, Air BnB, Lyft, Amazon Flex, etc.
In other words, I think the data is missing the Gig Economy, at least partially. And if that statement is true, then the numbers are not an accurate reflection of the economic input or output of these workers.