The Texas unemployment rate for May held steady at 4.1 percent, while nationwide unemployment for May hit an 18-year low at 3.8 percent, but during a recent visit to Fort Worth, Robert Kaplan, president of the Federal Reserve Bank of Dallas, still has some concerns.
The economy is facing both demographic and workforce issues, Kaplan said, speaking June 15 at the Fort Worth Chamber of Commerce’s Leaders in Business luncheon at the Petroleum Club.
“We expect workforce growth is going to be sluggish, and because of flagging education levels – and because workforce development, skills training, isn’t keeping up with the needs of the workforce – we think that while industries are becoming much more productive, we think corporate growth is likely to remain slow, unless we do something,” he said.
Kaplan was being interviewed at the luncheon by Harry Dombroski, the new dean of the UTA College of Business.
One workforce challenge is demographic. The nation’s population is aging and leaving the workforce, creating potential shortages that will slow the production of goods and services.
The labor participation rate — the proportion of people aged 16 to 64 working or looking for work — has fallen from 66 percent in 2007 to 62.8 percent today and the Dallas Fed projects that figure could slip below 61 percent over the next several years.
Asked about how the Federal Reserve should be involved in preparing the workforce for the future, Kaplan said the Federal Reserve’s job is to “flag the issue.”
“I’m saying that we need to improve early childhood – forget who does it or how – early childhood literacy, third grade reading level, digital divide, access to WiFi, college readiness, then you’ve got the high school skill training, college skill training, then we need beefed up re-training. We need all those things along the system,” Kaplan said.
State policymakers, he said, should take steps to improve early childhood literacy, secondary education and college readiness. More than half of the state’s college students don’t finish with degrees within six years.
“For me, and I say this as a former business person, the business community can help with a lot of that. But that has to be helped by local and state funding and I’m not going to get into it – who should provide what,” he said.
“But I am responsible for flagging these things that drive productivity, GNP, and our future prosperity, and I would be remiss in not flagging all these things. … These are things you need to improve upon human capital and investing is critical if you want to grow the GNP,” Kaplan said.
“I’ll leave it to the others to debate who pays for it and how. As a business person, I’ll say this to the business community, the Dallas Fed will convene groups to help focus on it.”
Kaplan said he expects the U.S. economic growth to slip below 2 percent by 2020 as the aging population slows workforce and productivity growth, and stimulus effects from the recent federal tax cuts and spending increases wane.
He favors the Fed raising interest rates gradually to avoid adding more drag on economic growth, and said he favors boosting the Fed’s key short-term interest rate twice more this year, which would bring the benchmark to just over 2 percent.
“The reason I’m on the gradual side is I’m worried about these structural headwinds — aging, sluggish productivity, and … high to unsustainable levels of government debt,” he said in an earlier interview to the Houston Chronicle.
– This report includes material from the Associated Press