Friday, January 2, 2015

Labor-Market Dropouts Stay on the Sidelines

A U.S. economy that suddenly looks healthy—50 straight months of job gains, best quarter of growth in 11 years—is falling short in a key area.
It isn’t luring back many of the millions who dropped out of the labor market during the down times. That failing nags at many economists.
Federal Reserve Chairwoman Janet Yellen monitors the declining share of Americans working or looking for work as a measure of slack in the job market. She has cited the low labor-force participation rate, as the measure is formally known, to justify the Fed’s long easy-money quest to stimulate the economy and boost wages.
A more buoyant economy and tightening labor market were supposed to draw in those now sitting on the margins. But the probability of a worker re-entering the labor force continues to slump. Over the past three months, an average of 6.8% of those outside the labor force either found a job or began looking for one. That means people are entering the labor force at the lowest pace in records kept since 1990, down from more than 8% in 2010.
CLICK CHART to ENLARGE
So even as the labor market has strengthened, the chance that a jobless worker will ever return to the workforce has decreased.
“To our disappointment, we haven’t seen the flows moving in a way that indicates we’re on the cusp of a big pickup in participation,” said Mike Feroli, the chief U.S. economist at J.P. Morgan Chase.
Every month, millions of workers leave the job market because of retirement, to care for children or aging parents, to pursue more education, or out of discouragement. Millions of others jump in after graduating, or finding jobs that entice them to re-enter.
If a strengthening economy prompted enough workers to return, the entrances could begin to outweigh exits. So far, that isn’t happening.
Read the rest of the story HERE.

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