MNI INTERVIEW: US Labor Data Not Unprecedented: Fed Economist

--Repeating Story Initially Sent at 12:24 ET/16:24 GMT Friday

By Jean Yung

     WASHINGTON (MNI) - A higher-than-expected U.S. labor force participation

rate, which Fed policymakers have viewed as a sign the economy can support

faster growth without needing higher interest rates to tame inflation, is only a

small deviation from demographic trends, Federal Reserve Bank of San Francisco

economist Marianna Kudlyak said in an interview Wednesday.

     The percentage of the U.S. working age population in employment or looking

for a job hit a five-year high of 63.2% in February, prompting Fed Chair Jay

Powell earlier this month to call the measure's performance since 2015 "an

upside surprise that most people didn't see coming."

     But the participation rate was less than 0.2 percentage point above trend

last year, Kudlyak said, noting that, by comparison, it rose some 0.4 percentage

point above demographic trends at the height of the expansion in 2000. The rate

bucked expectations just before the Great Recession too. She made no comment on

the implications for interest rates of this.

     "We don't see the actual labor force participation rate converging back to

trend yet," she said, but added, "I wouldn't say yet that it's historically

unprecedented. When the labor market is doing well, we typically see a low

unemployment rate and labor force participation above trend."

     --GRAYING WORKFORCE

     An aging population is expected to drag down the participation rate to

61.1% in 2028 from last year's 62.7%, according to a recent paper by Kudlyak and

co-author Andreas Hornstein, an economist at the Richmond Fed. Were it not for a

projected increase in educational attainment over the same time period, the rate

would decline even further to 60.2%, they found.

     But since 2015, participation has largely held steady and some months even

ticked higher.

     Its increase was "across the board, not only for women or men but across

the different educational groups," Kudlyak said.

     Men older than 35 with less than a high school education saw the largest

gains. Among them, those aged 55 to 64 who may have been sidelined as

manufacturing jobs disappeared appeared to have found work at a time when low

skilled services jobs were booming, seeing their participation rate jump by

nearly 4 percentage points.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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