CBO expects slack in the labor market to disappear over the next two years, as the growth of aggregate demand increases the demand for labor, eliminating the shortfall between actual and potential employment by the end of 2018 (see the figure below). That estimate is the effect of two expected developments. First, the gap between the actual and potential rates of labor force participation is projected to narrow; second, the unemployment rate is projected to fall below its estimated natural rate in 2017 and 2018. Also, increased demand for labor and competition for workers are expected to boost the growth of hourly labor compensation over those two years.
Employment. CBO projects that nonfarm payroll employment will increase more slowly over the next few years than it has recently—by an average of about 160,000 jobs per month in the first half of 2017, 116,000 jobs per month in the second half of 2017, and 94,000 jobs per month in 2018. One reason that employment growth is projected to slow is that as the employment shortfall shrinks, fewer people without jobs will be available to enter employment. A second reason is the retirement of baby boomers—people born between 1946 and 1964—which will slow the growth of the labor force. CBO’s employment projections imply that the number of people employed, measured as a percentage of the population, will increase by about one-quarter of a percentage point—to 60.0 percent—by the end of 2017 and then decline.
Chosen excerpts by Job Market Monitor. Read the whole story at Labor Market Projections | Congressional Budget Office