Posted by: Josh Lehner | April 6, 2016

Coming Out of the Woodwork, Labor Market Edition

Economic narratives can be like a slowly turning barge. Even if you know where you are headed, it takes a long time before people realize it, given the incremental progress along the way. In the case of the labor market that barge is the growing labor force and increasing participation rates. The most recent U.S. numbers released last Friday brought forth myriad articles talking about the near-record, or best in decades, increases in the labor supply in recent months.

To regular followers of the blog, this, of course, comes as no surprise. Our office has been beating the drum of the Labor Force Response, or the Return to Normal Labor Market Dynamics for at least the past couple of years. First come the jobs and job opportunities, then come increases in wages as businesses must compete on price (wages) to attract and retain the best workers in a tighter labor market and then finally come people in search of the more plentiful, better paying jobs.

From our most recent quarterly forecast, with an updated graph:

Additionally, a tighter labor market is resulting in increased hiring rates for the unemployed and even those not currently in the labor force. Over the past year and a half, the share of individuals who did not have a job, nor were actively looking for work, yet found a job the following month, increased considerably. Such trends generally appear the closer an economy is to full employment. As the number of unemployed decreases, businesses must cast a wider net to find and fill some positions, including potential hires that may not have been looking in the first place. Given the right opportunity, such workers move directly from not in the labor force to being employed, bypassing the unemployment stage of looking for work. While the U.S. economy is not yet fully healthy today, considerable improvement has been made in recent years and the pace of improvement remains strong.


As FiveThirtyEight’s Ben Casselman noted a couple weeks back, the people returning to the workforce today are not necessarily the same ones as those who dropped out during the Great Recession and its aftermath. The upticks are occurring in the younger age groups, pointing toward new entrants into the labor force, not re-entrants among older workers. Unfortunately we know some of the damage from the Great Recession is permanent, and this looks like one of those places. Even so, the increase in the overall labor supply and upticks in participation and employment rates is highly encouraging. It truly marks the return to normal labor market dynamics nationwide, something we have seen in Oregon already.


  1. […] closer to full employment, finding quality workers is certainly more challenging. Businesses must cast a wider net and also pay higher wages to attract and retain the best workers. This is happening today, in […]

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