Labor Market Reentrance in a Not-Yet-Healthy Economy

Written by Nick Buffie
Published: 04 March 2016 - The Center for Economic and Policy Research

Earlier this morning, the Bureau of Labor Statistics released its February jobs report. The February data are being well-received, with CEPR and other outlets highlighting the fact that workers finally seem to be moving back into the labor force.

One easy way to see this is by looking at the share of unemployed workers classified as “reentrants to the labor market.” Reentrants are people who have held a job at some point in the past and recently began searching for work after a period of non-employment.

The figure below shows that the share of unemployed workers who are reentrants has been rising for years and has nearly returned to its pre-recession level:

However, ideally this rate would not only return to its pre-recession level but surpass it. That’s because millions of workers left the labor force during the recession due to poor job prospects. With a much larger pool of prospective workers not in the labor force today than we had in 2007, we should anticipate a large number of workers reentering the labor market. When combined with a low layoffs rate and a low quits rate, we should undoubtedly expect labor market reentrants to constitute an abnormally high share of the unemployed. So while this measure has nearly returned to its pre-recession rate, it is nonetheless short of where we’d expect it to be given a fully recovered labor market.