Discouraged job seekers behind shrinking labor force

WASHINGTON Fri Apr 5, 2013 6:58pm EDT

People wait in line to meet a job recruiter at the UJA-Federation Connect to Care job fair in New York March 6, 2013. REUTERS/Shannon Stapleton

People wait in line to meet a job recruiter at the UJA-Federation Connect to Care job fair in New York March 6, 2013.

Credit: Reuters/Shannon Stapleton

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WASHINGTON (Reuters) - Americans giving up the hunt for jobs were likely behind a sharp drop in the U.S. workforce last month, a bad sign for an economy that is struggling to achieve a faster growth pace.

The number of working-age Americans counted as part of the labor force -- either with a job or looking for one -- tumbled by 496,000 in March, the biggest fall since December 2009, the Labor Department said on Friday. That pushed the so-called workforce participation rate to a 34-year low of 63.3 percent.

March marked the second month in a row that the participation rate declined -- 626,000 people have dropped from the work force since January.

Friday's report showed a decline in the number of discouraged job seekers last month after a pop in February, which at first glance might suggest the drop in the workforce was mainly because of shifting demographics.

But a closer look at the underlying numbers raises questions about the notion that retiring baby boomers were the driving force behind the shrinking workforce.

"You have to think that it's a large part demographics, but demographics are not really going to have such a big effect on month-to-month changes," said Keith Hall, senior research fellow at George Mason University's Mercatus Center.

Of the nearly 500,000 people dropping out, just 118,000 were aged 55 and older, meaning more than three-quarters of the increase came from below-retirement-age adults.

Also, the number of people 65 and older counted as part of the workforce actually rose by 27,000, which followed a 72,000 increase in February.

Hall said the sluggish economy was forcing some older Americans to continue working to rebuild retirement nest-eggs that were shattered during the 2007-09 recession.

Indeed, the participation rate for Americans between 55 and 64 years old held steady at a relatively high 65 percent. On the other hand, participation by the 25-29 age group was the lowest since record-keeping started in 1982.

"People are just giving up the search for work. A lot of them would like to work and they aren't, that is a serious sickness in the economy," said Peter McHenry, assistant economics professor at the College of William & Mary in Williamsburg, Virginia.

The drop in participation helped to lower the unemployment rate by a tenth of a percentage point to 7.6 percent. If the workforce had not contracted, the jobless rate would have risen two-tenths of a percentage point to 7.9 percent in March.

LONG GRIND

Since the recession ended, the economy has struggled to grow at a more than 2 percent pace. Economists say growth of more than 2.5 percent is needed over a sustained period to generate the number of jobs sufficient to reduce unemployment.

In March, the economy added an anemic 88,000 jobs, the fewest in nine months.

Some economists said the shrinking workforce was also likely the result of people falling off state unemployment benefit rolls. Jobless aid recipients are required to be actively looking for work.

"When that incentive is no longer available, they withdraw," said Patrick O'Keefe, head of economic research at CohnReznick in Roseland, New Jersey. "The persistently high ratio of job seekers to job openings is such that discouragement is high."

Falling participation, especially among young Americans, is troubling and could have long-lasting effects on the economy.

"For the young who are getting out of school, studies show a lot of their earnings growth comes in the first 10 years after they get out of school," said Hall, a former Bureau of Labor Statistics Commissioner.

"We're seeing a great deal of underemployed in youth and great disengagement, they are not participating in the labor market yet."

Not only will this trend hurt productivity, but the resulting low wages will reduce consumption, holding back economic growth. It could also complicate things for the Federal Reserve, which has made the labor market the focus of monetary policy.

Economists were concerned because the drop in the workforce came even though job growth had strengthened somewhat between July and February.

Michael Feroli, an economist at JPMorgan in New York, said the workforce decline cast doubts on hopes that improving labor market conditions would pull discouraged workers back into the labor force.

"The idea that labor force participation is structurally or institutionally impaired gains increasing credence with each passing jobs report," said Feroli.

(Reporting by Lucia Mutikani; Editing by Leslie Adler)

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Comments (11)
reality-again wrote:
Wall Street and the US economy decoupled sometime in 2009-10.
The current equity bubble is fueled by foreign investors who run for cover in view of the meltdown in Europe, and other foreign investors for whom anything is better than investing in their own countries.
On top of this, the Fed’s extremist QE policy is providing easy, almost free money to big speculators.

Apr 05, 2013 5:54pm EDT  --  Report as abuse
SanPa wrote:
Discouraged? How is a 55 year old software engineer to compete with kids imported on an H1B. Training? The import still requires on the job training before they attain full productivity.

Apr 05, 2013 9:03pm EDT  --  Report as abuse
AdamSmith wrote:
This article conveniently ignores the the elephant in the room: Immigration.

But a Hypothetical question:

What if growth were to come at the expense of every American family, hypothetically, being evicted from their current home, and in their place, a Chinese, or Indian, or Indonesian, or Brazilian, or Mexican family is given the home? The American family, in this thought experiment, be thrown into the streets.

Certainly, such a large influx of immigrants would cause economic indicators to shoot upward, would it not?

Certainly, all the economic indicators of America would skyrocket if we moved just half of the 1.3 billion Chinese people, half of the 1.2 billion people of India to America, and half of the 237 million people of Indonesia, into America and granted them citizenship.

Yes, the official economic indicators of America, e.g. GDP, and national income, and new jobs created, would indeed go way up. And many of America’s wealthiest would even profit from the mass immigration, because wage rates would plummet and rents would skyrocket.

But for the vast majority of American-born citizens, their families, lives and careers would be destroyed by such a mass influx of impoverished foreigners who would work for any wage.

This is what articles like this neglect to mention.

And by diverting the American people’s attention away from the current tidal wave of immigration, the massive purchase of American real estate by wealthy foreigners, the rapid outsourcing of American jobs, the planned great expansion of immigration next year, and the continuing H1B visa program, articles like this help the process of the conquest of America from the outside.

Largest Countries ranked by population

1. China 1.3 billion people

2. India 1.2 billion people

3. United States 315 million (growth is now skyrocketing due to immigration)

4. Indonesia 237 million (President Obama lived there in his grade-school years)

5. Brazil 193 million

6. Pakistan 182 million

7. Nigeria 166 million

8. Bangladesh 152 million

9. Russia 143 million

10.Japan 127 million

http://en.wikipedia.org/wiki/List_of_countries_by_population

Apr 05, 2013 9:17pm EDT  --  Report as abuse
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