If nearly one in three people who identify themselves as “retired” say they would like to go back to work if the job market improves, does it make sense to call them retired anymore? That’s the question policymakers will likely take away from the findings of a new poll released Wednesday.
Conducted by Reuters-Ipsos, the survey asked 7,727 adults about their employment status and their intentions with regard to future work. Among those who identified themselves as retired, 40 percent reported that they had stopped working involuntarily. And 30 percent said that, if a job became available, they would effectively “unretire” and rejoin the workforce.
This is part of the puzzle that Federal Reserve Board Chair Janet Yellen and her colleagues will be pondering later this week at their annual gathering in Jackson Hole, WY. The theme of the meeting is “Re-evaluating Labor Market Dynamics.”
After supplying huge amounts of liquidity to the economy during the Great Recession, the Fed is now cutting back on its purchases of securities, and it is at least beginning to consider when it will start pushing interest rates above the near-zero level where they have been for the past few years.
In fact, when minutes of the most recent meeting of the Federal Open Market Committee meeting were released Wednesday afternoon, some observers were surprised by the number of members who appeared to believe rate increases should come relatively soon.
The issue of interest rates is tied inextricably to the job market. The Fed has what’s known as a “dual mandate” from Congress. The central bank is charged with maintaining price stability, meaning an acceptably low level of inflation, and with attaining maximum employment.
The question of how quickly the economy is moving toward full employment is key to any decision about interest rates. If the job market tightens, wages should rise, which results in inflationary pressure on prices. Raising interest rates is a counter to inflationary pressure.
But right now, there is disagreement about how close the economy really is to full employment. With the current rate at 6.2 percent, nobody is arguing that we are anywhere near there yet. But while some economists believe the economy is approaching a point at which wage growth is inevitable, others, particularly Yellen, believe there is more “slack” in the labor market than the official unemployment rate measures.
The theory – backed up by the Reuters-Ipsos finding – is that many workers who are not now considered part of the workforce, will continue filtering back into the ranks of those looking for work as the economy continues to improve. Because of the way we measure the unemployment rate, which doesn’t count people who have given up looking for work, the return of people to the labor force can have the effect of keeping unemployment high even as the economy adds jobs.
Yellen has argued that a considerable number of workers are still poised to return to the labor force, which means wage hikes are still likely sometime in the future. Others, who believe we are approaching full employment at a faster clip, are the ones interested in preparing for an interest rate hike.
While Wednesday’s poll finding is another arrow in Yellen’s quiver, the debate is far from settled and will likely be the topic of much discussion in Wyoming this week.
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