Once jobless and
uncounted, eager workers could slow Fed rate hike
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[October 18, 2016]
By Howard Schneider
Missouri (Reuters) - The crammed-to-capacity parking lot at a job
training center in this St. Louis suburb is exhibit A for why the U.S.
Federal Reserve remains at odds over the health of the U.S. labor market
and how quickly interest rates should rise.
Among those in the building on a recent fall day, 23-year-old Joshua
Goodson described his recent work history as a "dead end." Motivated by
the prospect of a firm career foothold, he is now in a program at the
Family and Workforce Centers of America that includes both a curriculum
in heating and air conditioning installation, and the "soft" social
skills needed to keep steady employment.
It will take a few months, but "I will get a job, and nail it," he said.
As the nation's six year run of job creation reaches deeper into
neighborhoods like Wellston and nearby Ferguson -- site of a police
shooting two years ago that highlighted the depressed economic
conditions in some U.S. neighborhoods -- Goodson is among a pool of
sidelined workers returning to the labor force in unexpected numbers and
more readily landing jobs.
That subtle but surprising shift has stoked fresh debate within the Fed
over whether to risk slowing a process that is finally drawing in
marginalized residents like Goodson, and showing up in middle and lower
The discussion may be unlikely to stave off a December rate increase.
But it could influence the already glacial pace of tightening expected
by the Fed.
A Reuters analysis of federal labor flow data shows workers are moving
from outside the labor force directly into jobs at a record pace. That
is what Fed Chair Janet Yellen and others hoped would take hold as the
economy rebounded from a crisis that left millions jobless or caused
them to stop looking for work and leave the labor force altogether.
It is also something trainees in this high unemployment pocket northwest
of St. Louis hope will continue as they learn construction, business
administration and other skills, confident there will be steady jobs at
For Goodson, it is a chance to set aside a turbulent period in his life
that included participation in the Ferguson riots two years ago.
"I want to change my life, better myself, try to get a skill or trade
that could benefit me as a career," he said in an interview at a
facility that is working to prepare an often young and often black
clientele for jobs that are, at present, plentiful around St. Louis.
A HANDOFF TO THOSE ON THE SIDELINES
Job growth during a recovery typically first absorbs the unemployed --
people without a job who are actively looking for one -- before
reengaging those who have dropped out. Over the past two years, there's
evidence that has now begun to happen. The flow of workers from outside
the labor force directly into jobs has grown to more than double the
number captured in statistics as moving from out of the labor force to
Seven years since the recession ended, loose monetary policy is
"supporting the reabsorption of workers who have a relatively hard time
finding employment," said John Robertson, a senior policy adviser to
Atlanta Federal Reserve bank president Dennis Lockhart. It's a
development policymakers want to understand better to judge if there are
"structural limits" to how far it can proceed, he said.
With a national unemployment rate at five percent and other
labor-related measures near long run averages, some policymakers argue
their employment goal has been met and that interest rates should rise
to stay ahead of the inflation that typically comes with a tightening
Others are hesitant, noting as Fed chair Janet Yellen did last week that
a "high pressure economy" may be what's needed to repair some of the
damage from the crisis.
An eroded middle class or a poorly educated and compensated work force,
she has argued, could impair the country's economic potential. The Fed's
bias through much of the recovery has been to risk more inflation in
favor of a fuller jobs rebound, and at her most recent press conference
Yellen said she was encouraged.
[to top of second column]
Joshua Goodson, 23, Mark Morris, 17, and Sydney Roy, 20, (L to R)
are seen during an interview at the Family & Workforce Centers of
America in Wellston, Missouri, U.S. September 27, 2016.
REUTERS/Howard Schneider/File photo
were not really certain that this is something that would happen," Yellen said
of an uptick in the labor force participation rate.
"The economy has a little more room to run than might have been previously
AN ENCOURAGING TURN IN INCOMES
After years of income stagnation, the steady demand for labor finally showed up
in 2015 census surveys showing median incomes rising for the first time since
2007, with the strongest wage gains at the lower end. That's helping nudge
people like Toshia Verheggen to take the trouble to retrain.
son reached school age, Verheggen, 37, heard about LaunchCode, a nonprofit that
trains non-computer experts as coders and places them in apprenticeships. She
landed a job early this year, moving from a labor force nonparticipant to
writing software programs for a retirement benefits manager.
"Employers are bringing more jobs and more applicants are trying to get into the
funnel," LaunchCode executive director Mark Bauer said of the current labor
situation in St. Louis.
movement of people like Verheggen into jobs is helping answer an important issue
- whether the dislocation of workers during the crisis would be permanent,
scarring their finances as well as the country's potential, or reverse as
Adults who are neither in jobs or looking for work are not considered part of
the labor force. Their numbers have risen by a third in the last 15 years to
more than 94 million, and grown as a share of the over-16 population from 32
percent to 37 percent.
While that sometimes figures into political rhetoric, it is mostly driven be
demographics and personal choice as people retire, attend college, or stay home
to care for family.
telling is the number not in the labor force who say they want a job, meaning
they would like to work but are not out looking. That number stands at around 6
million, roughly 2.3 percent of the population over the age of 16.
From a recent high of around 2.7 percent in 2012, that number has been falling
towards its pre-Recession norm of close to 2 percent. To reach that level, a
million more people would need to get back into work.
Carolyn Seward, chief executive of the workforce center where young adults like
Goodson are training in heating and air conditioning, said people are ready to
engage but still midstream in their plans. Now would be the worst time for job
creation to slow.
"It is going to take another ten to fifteen years" to dent unemployment rates of
10 to 25 percent common in St. Louis' northwestern suburbs, Seward said. "There
has been such a disconnect."
(Editing by David Chance and Edward Tobin)
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