NEW YORK (MainStreet) — When the Bureau of Labor Statistics announced Friday that the unemployment rate had dropped to 8.3% after the economy added nearly 250,000 jobs in January, the message seemed clear: The U.S. is hiring again. Not only did this shatter hiring expectations, but it represented the fifth consecutive month that the unemployment rate had declined.
While that certainly sounds like good news for the millions of Americans currently looking for work, economists say it could also cause some of those who gave up on their job hunts in recent years to come back and resume their search, which would effectively make the labor market that much more competitive.
“There’s no question that more people will be entering the labor force,” says Mark Price, a labor economist with the Keystone Research Center, who notes that it’s necessary for more workers to re-enter the job market in order for the economy to get healthier. “But it’s absolutely correct to worry. From the perspective of someone looking for work, there is a good chance that there will be extra bodies out there looking too.”
Price and other economists who MainStreet spoke with do not expect there to be an influx of new workers overnight, but rather gradually throughout the course of the next six months or so if the positive jobs numbers continue. However, as Price points out, even that trickle of extra workers could pose a threat to current job hunters given that there are still more than four unemployed workers for every job opening.
To complicate matters further, baseline improvements in the jobless rate from month to month may overstate the actual pace of improvement in the labor market. Yes, unemployment is now at a three-year low, but some of that is due to the many Americans who either stopped looking for work altogether or accepted part-time employment out of desperation, since neither group is counted among the unemployed. The underemployment rate, which does factor in part-time workers, is stuck above 15% and the overall percentage of the population that is employed, which factors in those who gave up, remains more than four percentage points below where it stood just before the recession.
For many job hunters though, the traditional unemployment rate is all that matters and it’s that statistic which will convince people to look for jobs again even if the labor market is weaker than the unemployment rate implies.
“That’s the number which will be on the nightly news and in all the morning newspapers,” says Gary Burtless, a labor economist at the Brookings Institution, a nonprofit public policy organization. The net effect, he says, is that there may come a time when people start re-entering the labor force faster than the pace at which jobs are created. “There are going to be months where there is reasonably healthy job growth, but no decline in the number of unemployed. In some months, there may even be an increase.”