Most forecasters, including the Congressional Budget Office (CBO) think that unemployment cannot, or at least will not, fall much further from today’s level. The expectation behind this stalled downward march in projected unemployment is an assumption that the Federal Reserve will slow the economy by raising interest rates. And the Fed certainly could raise rates (regardless of whether it should raise rates). The CBO projection has the unemployment rate leveling off before reaching recent historical lows. However, we think it is important to compare performance on unemployment with EPI’s autopilot projection. Our projection shows that unemployment could hit its recent historic low of 4.0 percent by January 2019 if it continued to fall at the same rate it did from the end of 2015 to the end of 2016.

It is not obviously unrealistic to think that the unemployment rate could reach 4.0 percent. During the late 1990s and 2000s, the unemployment rate dipped below 4.0 percent for five months, and it averaged 4.0 percent in the full year 2000. During this period, inflation-adjusted wages rose across the board—for the only time in the last generation. This should be the type of labor market we aspire to have. Decisions by the Federal Reserve or by fiscal policymakers that thwart progress toward this goal would rob tens of millions of workers of the opportunity to be pulled back into the labor force or enjoy stronger wage growth.

The prime-age employment-to-population ratio (EPOP), which shows the share of the population age 25 to 54 with a job, is a key indicator of labor market health. Our projection shows that if the prime-age EPOP continued on the same pace of recovery as it has over the last year, it would reach 79.4 percent in 2019. Ambitious policymakers should aim for further improvement, as the EPOP has averaged as high as 81.6 percent (as it did over the 12-month period ending in 2000). At the current rate of improvement, it will not hit that 81.6 percent benchmark until 2022.