U.S. workforce growth may give Fed one more reason to go slow on rates

Tue Apr 26, 2016 7:14am EDT
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By Jason Lange

RALEIGH, N.C. (Reuters) - Americans with a high school education or less are returning to the labor force in larger numbers, a trend that points to a broadening of economic growth, but could also keep wage growth subdued and stay the Federal Reserve's hand in its hiking cycle.

The Federal Reserve meets this week and is expected to leave rates on hold. One factor it watches is slack in the labor market to see how much room the economy has to grow without triggering inflation.

The share of those 25 and older without high school diplomas who have jobs or are looking for one has risen 1.4 percentage points to 46.2 percent in six months to March, close to levels before the 2007-09 recession. For high school graduates, that share has risen by a half percentage point, while among those with college degrees the rate has remained virtually steady.

The return of less-educated workers to the labor force is a sign that the economy is still healing from the recession.

Americans with no more than a high school education accounted for nearly four out of every five jobs lost in the recession, according to research by economists at Georgetown University. Since such workers are considered at the greatest risk of being permanently shut out of the labor force, it fueled concerns that strains in the labor market might emerge even during spells of relatively modest economic growth.

Yet a Reuters analysis of Labor Department data suggests there could be more labor market slack than the unemployment rate of 5 percent may suggest because the improving economy has been spurring less-skilled workers to look for jobs again.

To count as part of the labor force, a worker needs to have held down a job or have actively searched for one in the last four weeks. Over the past year, in any given month there were about 6 million Americans who did not meet those criteria, a million more than before the recession. Until recently, Nathan Patterson, 24, who left high school in Illinois without a diploma and later moved to Raleigh, North Carolina, was often one of them, discouraged by poor job prospects from looking for work consistently.

Last year, though, a growing number of job openings posted in the area made him try again and in January he found a job with a company that processes scrap steel.   Continued...

A man and woman enter a job fair at the Phoenix Workforce Connection in Phoenix, Arizona August 30, 2011. REUTERS/Joshua Lott