As the economy improves, an abundance of unemployed people once frustrated by the depressed job market will jump back into the hunt all at once, causing the unemployment rate to rise, right?
That scenario is a myth, says Barclays (BCS: 15.08, -0.29, -1.89%), which predicts the unemployment rate will actually continue to recede despite an influx of new job hunters.
Sure, many workers saw fewer job opportunities, became discouraged and exited the labor market, causing labor participation rates over the last few years to fall. But a large number of people who have exited the job market were baby boomers retiring for good, meaning fewer people will be fighting for new positions as the economy heals.
Barclays expects the unemployment rate will fall below the Federal Open Market Committee’s 2012 and 2013 projections or 8.2% to 8.5%, and 7.4% to 8.1%, respectively. Goldman Sachs (GS: 117.33, +0.16, +0.14%) predicts it will drift slightly lower this year, ending 2012 at 8.2%.