Despite some optimism about the seeds of recovery, the Congressional Budget Office (CBO) sees joblessness rising. The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011. Source: Fortune, August 25, 2009 Why does unemployment continue to rise as an expansion begins?
As an expansion begins, previously marginally attached workers look for jobs, exceeding the number of people hired.
Explanation:
The unemployment rate is not a good indicator of the business cycle when the recession ends. However, as the economy expands, marginal workers who were not previously looking for jobs are now looking for it.
This makes the number of jobs more than the number of vacancies. For this reason, the unemployment rate also increased during the recovery phase.
