Unemployment. After surging to 14.7 percent in April 2020, the unemployment rate for the civilian noninstitutionalized population age 16 or older fell to 8.4 percent in August 2020, when this report was written. In CBO’s projections, the unemployment rate averages 10.6 percent in 2020, about 6.2 percentage points higher than the underlying long-run trend of unemployment. As the economy continues to recover from the recession, the unemployment rate is projected to continue to fall and eventually approach that underlying long-run trend. From 2028 on, the unemployment rate is expected to remain roughly one-quarter of one percentage point above that underlying long-run trend, a difference that is consistent with both the historical average relationship between the two measures and the projected gap of one-half of one percent between actual and potential GDP.

CBO projects the long-run trend of unemployment to decline gradually over the next three decades, from 4.4 percent in 2020 to 4.1 percent in 2030 and 3.7 percent in 2050, as the labor force ages and becomes increasingly educated. (Older and more educated workers tend to have lower rates of unemployment.) As the long-run trend declines, the actual unemployment rate is also projected to decline. By 2050, the long-run trend of unemployment is projected to reach 3.7 percent, and the actual rate is projected to reach 4.0 percent.

Average Hours Worked. Workers tend to work a different number of hours depending on their industry: For example, those in manufacturing work more than 40 hours per week, on average, whereas those in service industries work about 32 hours per week. As the share of workers employed in manufacturing has decreased and the share employed in service industries has increased over the past several decades, the average number of hours worked per week has declined for the economy as a whole. During the past decade, the shares of workers in the manufacturing and service industries have been largely stable. In CBO’s assessment, future changes in the employment shares of different industries are unlikely to have substantial effects on the economywide number of average hours worked.