I was pleased to speak this morning with a group of reporters who gather regularly at the invitation of the Christian Science Monitor. You can watch the entire hour-long session if you’d like.
At the beginning of the breakfast, I highlighted the following figures from our recent report on The Slow Recovery of the Labor Market.
In CBO’s view, the slow recovery of the labor market largely reflects slow growth in the demand for goods and services, with a smaller role for structural factors.
We estimate that considerable slack remains in the labor market. Specifically, we estimate that the economy is about 6 million jobs short of where it would be if the unemployment rate was back down to its prerecession level and the labor force participation rate was back up to the level it would be without the current cyclical weakness.
We expect that, under current laws governing federal taxes and spending, the labor market will strengthen considerably during the coming years because of a continued economic expansion and a lessening of the structural factors that have weighed on employment. We project that the unemployment rate will fall to 5.8 percent by the end of 2017 and to 5.5 percent by 2024, reflecting declines in both cyclical and structural unemployment. We also project that the downward pressure on the labor force participation rate from the recession and slow recovery will abate but that demographic trends and federal fiscal policies will diminish labor force participation—leading to a further decline in that rate during the next decade.
Under current law, CBO expects, nonfarm employment will increase by about 7 million from the end of 2013 to the end of 2017. That gain reflects a recovery in the demand for goods and services that will boost both labor force participation and businesses’ demand for labor as well as a gradual decline in the natural rate of unemployment as mismatches in the job market return to prerecession rates. Working in the opposite direction are demographic changes that will lower labor force participation. All told, CBO projects, the employment-to-population ratio will only edge upward, reaching 58.9 percent at the end of 2017—just 0.4 percentage points above the ratio at the end of 2013 and well below the peak of 63.3 percent reached at the end of 2006 and the beginning of 2007, before the recession.