After weeks of evidence that the labor market has stalled, including the first decline in payrolls in eight months in December, a recent government report reinforced what some economists have already predicted: the job market is expected to return to pre-pandemic levels by 2024.
The Congressional Budget Office (CBO) provided the optimism in its revised economic outlook report released Monday. The economic expansion that began in mid-2020 is expected to continue, the CBO said, and along with it, labor market conditions are expected to improve.
“As the economy expands, many people rejoin the civilian labor force who had left it during the pandemic, restoring it to its pre-pandemic size in 2022,” the CBO wrote in its report. It forecasts that the unemployment rate will gradually decline over the next few years and that the number of people employed will return to its pre-pandemic level by 2024.
The CBO’s forecast is not much different from what some economists have already predicted. Marisa Di Natale, senior director at Moody's Analytics, wrote back in October that she expects total employment to surpass its pre-pandemic level by the start of 2024. However, while a positive outlook, Natale’s predictions came before the most recent round of stimulus that was passed in December.
The CBO’s recent report, which includes data and estimates of the economic effects of all legislation (including pandemic-related legislation) enacted up to Jan. 12, sees the annual unemployment rate at 4.7% in 2023, down from an expected 5.7% this year and 5.0% in 2022. Those are steep upward revisions from the CBO’s original forecast released in July, when it said it expected the annual unemployment rate to be 8.4% this year and 7.1% in 2022.
The labor market is expected to improve as more people in the U.S. receive COVID-19 vaccines, social distancing declines, and the economy picks up again, the CBO said. Real (inflation-adjusted) gross domestic product (GDP) is expected to return to its pre-pandemic level around mid-year, the CBO said, and for the entire year, it projects real GDP growth of 4.6%, up from its prior forecast of 4.0%.
This rosier outlook is “in large part because the downturn was not as severe as expected and because the first stage of the recovery took place sooner and was stronger than expected,” CBO wrote in the report. However, it said its projections do not assume any additional stimulus President Joe Biden’s administration may get passed in the coming weeks.