WASHINGTON - For the first time in six years, the share of people who either have a job or are looking for one is on the rise in a majority of US states, a sign one of the deepest scars of the economic crisis could be healing.
Most states have experienced sharp declines in labour force participation since the 2007-2009 recession, but a Reuters analysis of government data found a reversal could be underway.
The data bolsters Federal Reserve Chair Janet Yellen's view that America has ample room to create jobs without causing uncomfortably high inflation and it buttresses arguments for keeping interest rates low. If Yellen is wrong, the Fed's easy money policies could lead employers to bid up wages for scarce talent, stoking price increases.
Anecdotal reports suggest that in many parts of the country, demand for labour appears to be growing enough to get people who had dropped out of the workforce to restart their job hunts.
"We are getting more job creation and we are seeing more people come in," said Paul Turek, a labour economist with Washington state's Employment Security Department.
Washington is one of 32 states where the participation rate rose in the six months through April, according to the Reuters analysis. Together, these states account for a majority of the nation's working-age population.
It was the second straight month where most states chalked up gains over a six-month period.
The data covering the 50 states and the District of Columbia is volatile, so it does not provide conclusive evidence of a bounce back in the labour force.
But since the start of the recession in December 2007, the direction of participation rates has been clear: they have been falling. It has been rare in recent years for more than a handful of states to show improved labour participation over any six-month period.
Now there's evidence the pendulum may be swinging back.
The gains are spread across the country - from states with rebounding construction industries like Florida and Utah to those with job growth in health care and education like West Virginia.
The Fed's Beige Book of anecdotal economic reports for May, which was released on Wednesday, said the US labour market "generally improved," with the central bank's Kansas City district reporting that businesses were now having to compete for workers, the Cleveland and Chicago districts noting an upturn in demand for temporary employees, and Atlanta pointing to a jump in the number of workers moving from temporary to permanent jobs. It said wage pressures remained "subdued."
Texas is another state making gains. Blessed with robust economic growth, the speed with which unemployed Texans find jobs is nearly twice as high as in the rest of the country, a dynamic that is coaxing discouraged workers from the sidelines, Dallas Fed economist Anil Kumar told Reuters. He expects a similar pattern will emerge nationwide.
"As the economy continues to improve, at least some of the people (will) be drawn back into the labour force," Kumar said.
Whether or not they return could be vital for the strength of the US economy, for the behaviour of inflation, and for the path of monetary policy.