The jobs report may be masking a monumental change in the US labor market

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Is the US nearly out of people to hire?

A low unemployment rate and middle-of-the-road increase in employment in Friday's jobs report for September seems to lend support to that argument.

But another statistic reported Friday — the labor force participation (LFPR) numbers — offers a clue that there's still slack in the job market.


LFPR measures the percentage of people over the age of 16 with a job or actively seeking jobs. It has started to tick higher lately — after years of declining — showing that people are getting back into the job market.

Related: High paying jobs you can get without a college degree

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The 30 highest-paying jobs you can get without a college degree
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The 30 highest-paying jobs you can get without a college degree
30. Construction and building inspectors

Description: Ensure that construction meets local and national building codes and ordinances, zoning regulations, and contract specifications.

Median annual wage (2015): $57,340

Projected job openings (through2024): 36,300

Work experience: Five years or more

On-the-job training: Moderate-term on-the-job training

(Getty)

28. Police and sheriff's patrol officers

Description: Maintain order and protect life and property by enforcing local, tribal, State, or Federal laws and ordinances.

Median annual wage (2015): $58,320

Projected job openings (through2024): 258,400

Work experience: None

On-the-job training: Moderate-term on-the-job training

(bluegame via Getty Images)

27. Gas compressor and gas pumping station operators

Description: Operate steam, gas, electric motor, or internal combustion engine driven compressors. 

Median annual wage (2015): $58,350

Projected job openings (through2024): 2,800

Work experience: None

On-the-job training: Moderate-term on-the-job training

(zorandimzr via Getty Images)

26. Stationary engineers and boiler operators

Description: Operate or maintain stationary engines, boilers, or other mechanical equipment to provide utilities for buildings or industrial processes.

Median annual wage (2015): $58,530

Projected job openings (through2024): 11,200

Work experience: None

On-the-job training: Long-term on-the-job training

(kaspiic via Getty Images)

25. Chemical plant and system operators

Description: Control or operate entire chemical processes or system of machines.

Median annual wage (2015): $59,320

Projected job openings (through 2024): 14,400

Work experience: None

On-the-job training: Long-term on-the-job training

(Photo By Joe Amon/The Denver Post via Getty Images)
24. Transit and railroad police

Description: Protect and police railroad and transit property, employees, or passengers.

Median annual wage (2015): $59,670

Projected job openings (through 2024): 1,300

Work experience: None

On-the-job training: Moderate-term on-the-job training

REUTERS/Andrew Burton (UNITED STATES - Tags: CRIME LAW TRANSPORT)
23. First-line supervisors of correctional officers

Description: Directly supervise and coordinate activities of correctional officers and jailers.

Median annual wage (2015): $59,720

Projected job openings (through 2024): 15,300

Work experience: Less than five years

On-the-job training: Moderate-term on-the-job training

(Photo by John Smierciak/Chicago Tribune/MCT via Getty Images)
22. Boilermakers

Description: Assemble, install, and repair boilers, closed vats, and other large vessels or containers that hold liquids and gases.

Median annual wage (2015): $60,120

Projected job openings (through 2024):4,200

Work experience: None

On-the-job training: Apprenticeship

(Daniel Grill via Getty Images)

21. First-line supervisors of construction trades and extraction workers

Description: Directly supervise and coordinate activities of construction or extraction workers.

Median annual wage (2015): $62,070

Projected job openings (through 2024): 103,600

Work experience: Five years or more

On-the-job training: None

(Zoonar RF via Getty Images)

20. Subway and streetcar operators

Description: Transport passengers.

Median annual wage (2015): $62,360

Projected job openings (through 2024): 5,200

Work experience: None

On-the-job training: Moderate-term on-the-job training

REUTERS/J.P. Moczulski
19. Claims adjusters, examiners, and investigators

Description: Review settled claims to determine that payments and settlements are made in accordance with company practices and procedures.

Median annual wage (2015): $62,980

Projected job openings (through 2024): 84,000

Work experience: None

On-the-job training: Long-term on-the-job training

(BartCo via Getty Images)

18. First-line supervisors of mechanics, installers, and repairers

Description: Directly supervise and coordinate the activities of mechanics, installers, and repairers.

Median annual wage (2015): $63,010

Projected job openings (through 2024): 113,500

Work experience: Less than five years

On-the-job training: None

(Richard Drury via Getty Images)

17. Signal and track-switch repairers

Description: Install, inspect, test, maintain, or repair electric gate crossings, signals, signal equipment, track switches, section lines, or intercommunication systems within a railroad system.

Median annual wage (2015): $63,840

Projected job openings (through 2024): 1,500

Work experience: None

On-the-job training: Moderate-term on-the-job training

(MiguelMalo via Getty Images)

16. Farmers, ranchers, and other agricultural managers

Description: Run establishments that produce crops, livestock, and dairy products.

Median annual wage (2015): $64,170

Projected job openings (through 2024): 158,400

Work experience: Five years or more

On-the-job training: None

(Ablestock.com via Getty Images)

15. Petroleum pump-system operators, refinery operators, and gaugers

Description: Operate or control petroleum-refining or -processing units.  

Median annual wage (2015): $65,190

Projected job openings (through 2024): 17,000

Work experience: None

On-the-job training: Moderate-term on-the-job training

Vincent Mundy/Bloomberg via Getty Images
14. Gas-plant operators

Description: Distribute or process gas for utility companies and others by controlling compressors to maintain specified pressures on main pipelines.

Median annual wage (2015): $66,010

Projected job openings (through 2024): 6,300

Work experience: None

On-the-job training: Long-term on-the-job training

(Hero Images via Getty Images)

13. Electrical-power-line installers and repairers

Description: Install or repair electrical-power systems and telecommunications cables, including fiber optics.

Median annual wage (2015): $66,450

Projected job openings(through 2024): 60,300

Work experience: None

On-the-job training: Long-term on-the-job training

(Ariel Skelley via Getty Images)

12. Gaming managers

Description: Plan, direct, or coordinate gaming operations in a casino.

Median annual wage (2015): $68,380

Projected job openings (through 2024): 800

Work experience: Less than five years

On-the-job training: None

(Michael Blann via Getty Images)

11. Postmasters and mail superintendents

Description: Plan, direct, or coordinate operational, administrative, management, and supportive services of a US post office.

Median annual wage (2015): $70,640

Projected job openings(through 2024): 3,800

Work experience: Less than five years

On-the-job training: Moderate-term on-the-job training

(dardespot via Getty Images)

10. Transportation inspectors

Description: Inspect equipment or goods in connection with the safe transport of cargo or people.

Median annual wage (2015): $70,820

Projected job openings (through 2024): 7,100

Work experience: None

On-the-job training: Moderate-term on-the-job training

(moodboard via Getty Images)

9. Power-plant operators

Description: Control the systems that generate and distribute electric power.

Median annual wage (2015): $71,940

Projected job openings(through 2024): 14,100

Work experience: None

On-the-job training: Long-term on-the-job training

(Lester Lefkowitz via Getty Images)

8. First-line supervisors of non-retail-sales workers

Description: Directly supervise and coordinate activities of sales workers other than retail-sales workers.

Median annual wage (2015): $72,300

Projected job openings (through 2024): 69,900

Work experience: Less than five years

On-the-job training: None

(Reza Estakhrian via Getty Images)

7. Commercial pilots

Description: Fly and navigate airplanes or helicopters.

Median annual wage (2015): $76,150

Projected job openings (through 2024): 15,100

Work experience: None

On-the-job training: Moderate-term on-the-job training

(Digital Vision via Getty Images)

6. Detectives and criminal investigators

Description: Conduct investigations related to suspected violations of federal, state, or local laws to prevent or solve crimes.

Median annual wage (2015): $77,210 

Projected job openings (through 2024): 28,300

Work experience: Less than five years

On-the-job training: Moderate-term on-the-job training

(moodboard via Getty Images)

5. Power distributors and dispatchers

Description: Coordinate, regulate, or distribute electricity or steam.

Median annual wage (2015): $80,840

Projected job openings (through 2024): 3,900

Work experience: None

On-the-job training: Long-term on-the-job training

(Kim Steele via Getty Images)

4. Elevator installers and repairers

Description: Elevator installers and repairers install, fix, and maintain elevators, escalators, moving walkways, and other lifts.

Median annual wage (2015): $80,870

Projected job openings (through 2024): 5,900

Work experience: None

On-the-job training: Apprenticeship

(Getty Images/iStockphoto)

3. First-line supervisors of police and detectives

Description: Coordinate activities of members of a police force.

Median annual wage (2015): $82,090

Projected job openings (through 2024): 43,000

Work experience: Less than five years

On-the-job training: Moderate-term on-the-job training

(HHLtDave5 via Getty Images)

2. Transportation, storage, and distribution managers

Description: Coordinate transportation, storage, or distribution activities in accordance with organizational policies and applicable government laws or regulations.

Median annual wage (2015): $86,630

Projected job openings (through 2024): 27,100

Work experience: Five years or more

On-the-job training: None

(Morsa Images via Getty Images)

1. Nuclear-power-reactor operators

Description: Operate or control nuclear reactors by moving control rods, starting and stopping equipment, monitoring and adjusting controls, and recording data in logs.

Median annual wage (2015): $88,560

Projected job openings (through 2024): 2,600

Work experience: None

On-the-job training: Long-term on-the-job training

(Geoff Tompkinson via Getty Images)

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In the latest reading, the labor force increased by 0.1% from the previous month. That may not seem like a lot, but compared to the same month a year ago, the labor force grew by 1.9%, the largest annual percentage jump since January 2007.

This is good news for the US economy, no matter how you slice it. But interpretations of this data could impact policy decisions — namely how aggressively the Federal Reserve raises interest rates.

fredgraph (2)Justin Sullivan/Getty Images

According to Neil Dutta at Renaissance Macro, the labor force numbers were particularly encouraging.

"The labor force participation rate climbed 0.1 ppt to 62.9%, the highest since March," wrote Dutta in a note to clients following the report. "Over the last year, the civilian labor force has climbed by nearly 2%, a very strong pace. Importantly, the prime-age participation rate (25 to 54 years) surged 0.2pp to 81.5%, the highest in nearly three years."

The LFPR is still lower than the long-term average, but much of this is due to an increase in the number of baby boomers retiring. Outside of this long-term trend, recent moves in the labor force for young people returning to the workforce offers an interesting look into the strength of the labor market.

As noted by Dutta, the percentage of young people in the labor force of prime-age workers, or those age 25-54, increased by 1% over the past year, and as Josh Zuburn at the Wall Street Journal noted, the biggest year-over-year increase in at least 30 years.

Additionally, as noted by Bill McBride of the Calculated Risk blog, even withing the prime age the people joining the labor force are skewed younger. For 25 to 29 year olds, there has been a labor force increase of 2.5% over the past year, while 50 to 54 year olds have seen a 2% drop.

The data doesn't give any insight into why the increase is occurring, but it could be a combination of young people graduating from college or grad school or those who were not able to find work getting a job. Even people without a high school degree have seen their jobs prospects improve, despite an uptick in that groups unemployment rate in the last month.

The prime-age increase may be the most significant, as even President Obama has worried about the increase of young people not in the labor force.

This is of particular importance to the Fed given that full employment is one of their two stated mandates. To Torsten Sløk, chief global economist at Deutsche Bank, the September report indicated that the Fed has met its goal.

"For the first time in almost 20 years, we are now seeing a decline in the number of people outside the labor market. As the first chart shows, this is consistent with what we saw in the mid-19 90s and 2006, when we also were at full employment," said Sløk in a note to clients after the report.

Screen Shot 2016 10 07 at 10.30.15 AMJustin Sullivan/Getty Images

On the other side, however, one could argue that young people entering the labor force at the fastest rate in years shows that there are discouraged workers who still actually do want jobs but are outside of the labor force, thus labor market slack. So, to encourage more hiring by firms that would draw those people outside of the labor force back into it, the Fed should keep interest rates on hold.

Essentially, you could either interpret the jump two ways depending on how optimistic you are.

Either:

A. The labor force jump shows there is a hidden pool of discouraged workers that still need to be pulled into the labor force through low interest rates

Or:

B. The labor force increase shows that businesses have run out of easily available workers to hire and now are having to pull on discouraged workers to re-enter the job market to find employees.

Supporting option B is probably also wage growth data, which is at a post-recession high and is even better for non-management workers and low-wage groups like construction workers, as noted by Dutta. If wages are increasing, this would indicate that the pool of workers is smaller and forcing businesses to raise pay to attract workers.

Basically, the labor force increase is an encouraging sign for the continued healing of the US economy.

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