MarketWatch (11/03/15) Jeffry Bartash

The labor market is tighter than it has been in the last 15 years, according to Stephen Williamson, vice president of the Federal Reserve Bank of St. Louis. Moreover, there is an unusually high number of people who are among the ranks of the long-term unemployed who “may be masking how tight the labor market is,” says Williamson. Approximately 2.1 Americans were classified as long-term unemployed in September, a sharp decrease from the 6.8 million recorded in early 2010.

This position underscores a prominent debate inside the central bank about the true health of the nation’s labor market. The Fed is more likely to increase interest rates soon if a majority of its leaders believe jobs are abundant and that most people who want a full-time job could find one. Numbers suggest, however, that many in the long-term unemployed demographic lack the necessary skills to get hired for the jobs available now, according to Williamson, who notes that some of these individuals “are unlikely to be hired under any condition,” and may soon drop out of the labor force completely. If half of the 2.1 million long-term unemployed were not counted as part of the labor force, U.S. unemployment would be 4.6%, instead of the official 5.1% rate, Williamson says.