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One of the biggest problems caused by the Great Recession might be turning around.
In addition to massively increasing the unemployment rate, the Great Recession led to a rise in broader measures of labor slack. For example, the labor force participation rate, which was already falling for demographic reasons as the Baby Boomer generation began to hit retirement age, started to decline much more quickly.
A note circulated by Bank of America Merrill Lynch took a brief look at two other measures of labor market slack: marginally attached workers, who want to work but have not been actively looking for jobs, and involuntary part-time workers, who are working part-time because they can't find full-time jobs. Both of these categories fall outside of the normal unemployment rate, which measures people who are out of work and searching for jobs.
During the Great Recession, those measures, like the unemployment rate, skyrocketed, and have gradually come down since.
The Bank of America note observed (emphasis ours):
"This cohort [of discouraged workers] has been declining as we get farther from the crisis, suggesting these individuals either found employment or became increasingly detached. If we include other measures of labor market slack, such as workers who are employed but desire full-time work (involuntarily part-time workers), we see a similar trend. This suggests that there is a shrinking share of workers who are on the fringe of the labor force."
It's taken a while, but we might finally be getting close to a healthy labor market.
Bank of America Merrill Lynch