Unemployment Falls To Two Year Low In March: The Effects Of Increased Labor Force Participation

economy

Unemployment Falls To Two Year Low In March: The Effects Of Increased Labor Force Participation

Unemployment could fall further at early stages of growth even as more workers start looking.

The unemployment rate fell further in March.  More people were added to the workforce and the numbers showed that the jobs market is becoming more firm.  Hiring in the next few weeks could fluctuate but the economy has gone from around 9.8 percent unemployment in 2010 to 8.8 percent. The news helped lift stocks to 2 year highs during market trading and the increase in unemployment may continue to improve investor sentiment and consumer confidence.

The Positive Effects Of More Workers Entering The Labor Force:

New workers are entering the labor force daily which some have argued may temporarily increase the unemployment rate.  This is possible and short term fluctuations should be considered noise if trends continue to improve.  Many workers entering the labor force could drive up wages and possibly have a positive impact on the rate of hiring if companies are:

  • increasing earnings which increases opportunity cost of not hiring.
  • scaled back too much during the downturn – but may be more profitable now

The marginal increase in hiring could have multiplier effects on consumption and this could stimulate economic growth further. The news headlines for incremental increases will largely have a positive impact also and advanced employment matching technology should lead to decreased costs for job fillings over time.


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