Wall Street Journal (08/25/15) Nick Timiraos

More Americans who left the workforce temporarily or who stayed out of the workforce because of weak job prospects will return in the coming years as demand for labor builds in the economy, according to a new report from the Congressional Budget Office. The report said that evidence shows that jobless spells have caused a less permanent stigma and erosion of skills than previously believed.

According to CBO, the U.S. labor market may contain more people than previously estimated who do not have jobs and have not been looking, which means that so far, they have not been counted in the official unemployment statistics. CBO director Keith Hall said the data now show that people are returning to the labor force a little bit faster than anticipated. CBO raised its estimate of the potential participation rate from the forecast issued in January. CBO also revised down its estimate of the rate of unemployment at which slack disappears, which also indicates more spare capacity in the labor market, to 5.1% from 5.4%.