WASHINGTON: When Shalika Tisinger begins looking for a job this summer, Federal Reserve Governor Jerome Powell will be rooting for her.
Tisinger, 33, dropped out of college at 19 and bounced through a series of low-paying jobs. Struggling to find a solid career path, she went back to school in 2014. In May she’ll graduate from Atlanta Technical College and expects to be certified as a surgical technician by the end of July.
“There is no way around it,” she said. “You have to have some kind of degree to get a good position.”
There are a lot of Shalika Tisingers out there and just how many of them can be drawn back into the labour force is a subject of growing interest among Powell and his fellow policymakers, who gather next week to ponder when and how fast to raise interest rates.
An estimated 8.1 million people have dropped out of the US labour force since 2007, according to data from the Bureau of Labour Statistics. That’s more than the combined populations of Los Angeles, Chicago and Philadelphia who’ve not only lost jobs, but stopped looking for work altogether. “It’s the tragedy of wasted talent,” said Justin Wolfers, a senior fellow at the Peterson Institute for International Economics in Washington. “Translated into economic terms, it means GDP is lower.”
Bringing half of those missing workers back into the labour force — even assuming they would contribute less than the average in terms of productivity and hours worked — would lift gross domestic product by about 1.5pc, according to an estimate by Jesse Rothstein, a former chief economist at the Labour Department who now teaches at the University of California at Berkeley.
Tisinger is probably better off than most, having picked up new skills. Yet Powell is optimistic job prospects for many of those who’ve dropped out of the labour force are ticking up with the economy.
“As business confidence improves, employers may be more willing to take a chance on someone with an extended spell of unemployment,” Powell said in New York on April 8.
“A stronger job market and rising wages may encourage more potential workers to join the labour force.”
If so, it’s a big deal for Powell and his fellow policy makers. It means they could continue to keep rates low to drive down unemployment. While Fed officials have ruled out a rate increase at next week’s meeting, they have projected tightening will begin later this year as the labour market strengthens. The benchmark federal funds rate has stood near zero since late 2008.
By arrangement with Washington Post-Bloomberg News Service
Published in Dawn, April 26th, 2015
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