CBO: Unemployment to Be ‘Largely Unchanged’ in 2012, 2013
(CNSNews.com) – The Congressional Budget Office (CBO) projects that the unemployment situation will remain “largely unchanged” in 2012 and again in 2013 as the economy struggles to recover from the record recession of 2007-2008.
“In CBO’s forecast, the unemployment rate in 2012 and 2013 remains largely unchanged from its value last year,” CBO said in its updated budget forecast Tuesday.
CBO reported that while jobs market conditions will improve slightly next year, the overall jobless situation will not improve much at all. CBO also reported that labor force participation – those who either have work or are actively looking for work – will decline by another one percent by 2017.
“[T]he rate of participation in the labor force will fall by about 1 percentage point by 2017,” the report said.
In fact, unemployment will not return to its pre-recession level of about five percent until 2022, CBO finds. CBO estimates that unemployment will remain about one percent higher than the pre-recession level of five percent, due partly to the inability of the long-term unemployed to find work. In other words, the recession will result in about a 0.5 percent permanent increase in the unemployment rate.
CBO also said that the labor force itself will shrink permanently due to the recession. This means that because of the persistently high unemployment caused by the recession, millions of people will permanently give up looking for work.
“The rate of participation in the labor force fell from 66 percent in 2007 to an average of 64 percent in the second half of 2011,” CBO said. “By CBO’s estimates, the rate of labor force participation will fall to slightly above 63 percent by 2017.”
CBO said that had millions of people not given up looking for work entirely, “the unemployment rate in the fourth quarter of 2011 would have been about 1.25 percentage points higher than the actual rate of 8.7 percent.”
In other words, the unemployment rate would have been almost 10 percent – 9.95 percent exactly – had so many people not been driven from the workforce by the lack of jobs.