Unemployment in the United States — currently 6.7 percent and falling rapidly — will reach its “natural rate” of 5.5 percent by late 2015, according to a report released today by The Conference Board’s report entitled, “From a Buyer’s Market to a Seller’s Market.” The decline will continue past this benchmark; over the next 15 to 20 years, U.S. unemployment may even dip below 3.8 percent, the lowest rate recorded since the 1960s, the report finds.

“While our conclusions may seem unlikely today, they rest on a simple fact: nearly all baby boomers will be out of the job market by 2030,” said Gad Levanon, director of macroeconomic research at The Conference Board and a co-author of the report. “As working-age population expansion slows to a crawl, even modest job growth should steadily tighten the labor supply and force wages higher. In the short run, this will be good news for workers. But it could also become a major handicap on U.S. growth and competitiveness, which we must prepare for now.”

Among the report’s other key findings:

• Most of the millions who left the active job market during the Great Recession are unlikely to return. Many are retired or disabled, while “skill erosion” has made others uncompetitive in the eyes of employers. Thus the official unemployment rate is a broadly accurate measure of slack in the labor market, not misleadingly low as many commentators argue.
• Since 2009, unemployment decline has outpaced previous recoveries even as GDP growth lags behind. Meanwhile, wage growth, voluntary quit rate and employers’ difficulty in filling positions are all trending up, suggesting the transition to labor shortages is under way.
• As baby boomer retirements mount, wage pressure will form a growing constraint on corporate profits and, ultimately, economic growth. Seeking to increase productivity and reduce costs, companies may raise prices and move operations to cheaper areas.
• Impacts will vary widely across industries. Those in which older workers are concentrated — and which attract few skilled immigrants — will be at highest risk of labor shortages. These include law enforcement, plant operations, and rail and water transport. Conversely, relatively high numbers of young and foreign entrants should mitigate the effects on high-growth science and technology fields.
• Immigration and productivity are open factors in general — a surge above trend growth for either could offset much of the demographic pressure currently projected.