America's hidden unemployed: too discouraged to count

WASHINGTON Sun Sep 23, 2012 11:02am EDT

1 of 4. Jobseekers wait in front of the training offices of Local Union 46, the union representing metallic lathers and reinforcing ironworkers, in the Queens borough of New York, in this April 29, 2012 file photograph.

Credit: Reuters/Keith Bedford/Files

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WASHINGTON (Reuters) - When Daniel McCune graduated from college three years ago, he was optimistic his good grades would earn him a job as an intelligence analyst with the government.

With a Bachelor of Science degree from Liberty University in Virginia, majoring in government service and history, McCune applied for jobs at the National Security Agency, the Federal Bureau of Investigation and other agencies.

But after a long hunt that yielded only two interviews, the 26-year-old threw in the towel last fall, joining millions of frustrated Americans who have given up looking for work.

"There's nothing out there and there probably won't be anything for a while," said McCune, from New Concord, Ohio. He has moved back home to live with his parents, who are helping him pay off his college debt of about $20,000.

"I don't like it, it's embarrassing. I don't want to be a burden to my parents," said McCune, adding that he felt like a high school dropout.

Economists, analyzing government data, estimate about 4 million fewer people are in the labor force than in December 2007, primarily due to a lack of jobs rather than the normal aging of America's population. The size of the shift underscores the severity of the jobs crisis.

If all those so-called discouraged jobseekers had remained in the labor force, August's jobless rate of 8.1 percent would have been 10.5 percent.

The jobs crisis spurred the Federal Reserve last week to launch a new bond-buying program and promise to keep it running until the labor market improves. It also poses a challenge to President Barack Obama's re-election bid.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one has fallen by an unprecedented 2.5 percentage points since December 2007, slumping to a 31-year low of 63.5 percent.

"We never had a drop like that before in other recessions. The economy is worse off than people realize when people just look at the unemployment rate," said Keith Hall, senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia.

The participation rate would be expected to hold pretty much steady if the economy was growing at a normal pace. Only about a third of the drop in the participation rate is believed to be the result of the aging U.S. population.

SLOW PROGRESS

The economy lost 8.7 million jobs in the 2007-09 recession and has so far recouped a little more than half of them.

Economists say jobs growth of around 125,000 per month is normally needed just to hold the jobless rate steady.

Given the likelihood that Americans will flood back into the labor market when the recovery gains traction, a pace twice that strong would be needed over a sustained period to make progress reducing the unemployment rate.

Last month, employers created just 96,000 jobs.

Roslyn Swan lost her job in 2007 as a portfolio associate at a financial firm in New York. After submitting hundreds of applications, the 44-year-old is taking a break.

"Maybe after the elections," Swan said of her next attempt to get work. "I know that I will be employed again. I don't know when, but I know it will happen."

Americans of all ages are leaving the workforce, but the problem is most acute in the 20-24 age group, where the participation rate has plunged by 4.4 percentage points since December 2007.

Many Americans typically start working in their teens, taking part-time jobs after school and over summer vacations, a tradition that is supposed to instill a work ethic. With many failing to secure jobs after graduating from high school and college, analysts worry about U.S. competitiveness.

"Because of delays to their career, the skills set accumulation that normally happens in the first or third job is not happening," said Paul Conway, president of Generation Opportunity in Washington, a non-profit, non-partisan organization that works with 18- to 29-year-olds on economic issues.

TOUGH ON YOUNG WORKERS

Last month, the proportion of 20- to 24-year-olds in the labor force was its lowest since 1972. Other age categories are faring little better. The 25-54 age group has seen a decline of 1.8 percentage points since December 2007.

Some, like 27-year-old Casey Potts, have gone back to school. She is studying nursing in Kentucky after losing her medical sales job.

"If I had stayed in medical sales, I would be job searching now," said Potts.

But separate surveys by the Economic Policy Institute (EPI) and Generation Opportunity found little evidence that young people were going back to school when unable to land a job.

One deterrent is the rising cost of education and record levels of student debt. About two-thirds of 2012 college graduates left school in debt, owing on average $28,700 in student loans, according to Mark Kantrowitz, publisher of FinAid.org.

"Young people dropping out of the labor force to go back to school would be a silver lining if it were true," said Heidi Shierholz, a senior EPI economist, adding that enrollment had gradually been increasing for decades.

A Generation Opportunity survey published in August showed a third of young people were putting off additional training and post-graduate studies because of the sour economy.

"This is significant. People are making the decision to put those off because the assurance of a return to investment is not there," said the non-profit's Conway, a veteran observer of the labor market as a former Department of Labor chief of staff.

He said his organization found that young people were doing unpaid internships at nonprofit groups and businesses to prevent their skills from atrophying. Others were joining the military.

Some economists say the participation rate does not paint a true picture because people find work in the informal sector, ranging from legal activities such as child care to crime in some cases.

"People are picking a buck here and there and not being reported in anybody's payroll," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.

"They will say they are not doing anything, even as they have a job and are being paid under the table," said O'Keefe, a former deputy assistant secretary at the Labor Department. "We do not know to what extent that is going on."

(Additional reporting by Jilian Mincer in New York; writing by Lucia Mutikani; editing by William Schomberg)

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Comments (20)
Gordon2352 wrote:
A nice bit of human interest “fluff” for a Sunday morning’s reading, but totally devoid of any real content as to what will happen if this situation continues and the US has to deal with high structural unemployment — which the government thusfar chooses to ignore completely.

Sep 23, 2012 10:38am EDT  --  Report as abuse
IntoTheTardis wrote:
I hate to sound callous about young Daniel McCune’s troubles, but seriously, Liberty University? That’s Falwell’s Christian college. I live in Virginia and it doesn’t have a very good academic reputation even here. They teach Young Earth Creationism for heaven’s sake! I realize that recent college grad unemployment is unacceptably high, but if you’re going to waste your time and money at a place like Liberty you shouldn’t be surprised if people don’t give you a second look.

Sep 23, 2012 10:38am EDT  --  Report as abuse
phoenix2 wrote:
I can see this issue from many perspectives. I have two adult children, both in college. I have one grandchild. I have been gainfully employed in two different careers since I was a teenager; and the change in business practices, across the board, is rather shocking to me. From late 2009 to early 2011, I had a full time job with good benefits for a major luxury retailer managing an exclusive cosmetics line. The business was very successful. I heard there was another counter open at a competing retailer(Nordstrom, Tysons Corner)who wanted to interview me. Thus began a 10 week interview process, where I was promised different counters, interviewed with two different managers, phone interviews, misrepresentations about counter availability, promises of counters that didn’t exist at that store; just an incredibly negligent pattern of management from Nordstrom.

I have a tendency to believe business communications. If a vendor/AE tells me a shipment is coming in on Tuesday, I believed them. Not so much anymore.

Six weeks into the interview process, I gave notice to my employer, having been told that my salary and training hours were approved by Nordstrom. Again, another material misrepresentation by Nordstrom.

I have done some digging in the last year. Apparently the AE for Clarins Nordstrom account was in the hospital, and never returned to the company. Instead of Nordstrom management telling me straight up, we can’t fill this position, they string me along with an offer for a full time CM position for another luxury line. This situation became so egregious that two Clarins VP’s called me and told me “we had nothing to do with this situation” another lady from Philosophy cosmetics, who worked with Nordstrom, and with whom I interviewed, said even she had heard of this situation, and “could not believe it”

So, I tell this tale to illustrate how much the workplace has changed, and to shame Nordstrom into changing its interview process. 6-8 weeks for a cosmetics management job? It should take no longer than 3 weeks. Lying to applicants is shameful, in this economy. The negligent parties should be fired. In the modern workplace, the employer can cut your pay and hours and not even tell you. They can fire you in at-will states and throw you out in the middle of that day like garbage. They can promise you a position, then rescind said position, with a robocall. This happens all of the time, and the american worker, increasingly, is being treated like a day laborer, prison labor, or foxconn slaves.

They behave this way because they can get away with it. And the irony is that the same policies that increase profits for stockholders, are terrible for workers. You see the bind people are in. Value increases when every drop of labor is squeezed, when payrolls are cut, not increased; so if you can buy stock, you will earn alot of money; if you work for them, you can work yourself to death, and never earn as much. Apple is a perfect example. Their stock is worth a fortune, and their products are made by abject slaves. The american workplace is moving toward this model.

Trust me, I hav every good instincts.

These are good middle class jobs and they are disappearing in favor of 8$@hour slave jobs.

So that is what these young people are up against.

The only reason this was not completely ruinous for me is because we inherited assets. I had, and found, other work. I had a lifetime of accumulation behind me. For million of others, however, this would have left them homeless and starving.

These employers really should take that into consideration while setting up their next round of interviews for employment; you could be sitting across the desk from someone who will eat you alive.

Sep 23, 2012 12:21pm EDT  --  Report as abuse
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