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Jobless rate may rise as many are drawn back to labor force

By V. Dion Haynes
Monday, April 5, 2010; A01

The increase in jobs highlighted in the nation's most recent unemployment report carried the sound of economic promise, but Obama administration officials said Sunday that the public shouldn't expect any dramatic improvement in the jobless rate, largely because of the effect of thousands of "discouraged" unemployed people who have resumed their search for work.

Some economists assert that the unemployment rate, which held steady at 9.7 percent in March, is likely to be driven higher as many more such people are lured into looking for work by signs of recovery.

The number of people looking for jobs rose by more than 200,000 last month compared with February, according to the Economic Policy Institute -- and that's a good sign, economists say. It means that Americans are seeing more jobs being created and that they're optimistic about their prospects.

But the supply of new jobs -- 162,000 in March, the biggest monthly increase in three years -- will accommodate only a fraction of the unemployed. Some economists say the jobless rate will not recede to pre-recession levels near 5 percent for four more years.

Those described as discouraged -- who are available and want to work but have stopped looking for jobs -- can affect the data significantly because of how the government calculates the jobless rate. They are considered part of the labor force and are counted in the official unemployment rate only if they are looking for work. So dropping out can deflate the rate, and resuming a search can inflate it.

Behind the high unemployment rate, "there's just been a tremendous increase in the labor force," Christina Romer, chairman of the president's Council of Economic Advisers, said on NBC's "Meet the Press."

"Over the last three months, we've added more than a million people to the labor force. And that's actually, that's a great sign," Romer added. "That's a sign that people that might have been discouraged dropped out because of the terrible recession, have started to have some hope again and are looking for work again."

Lawrence H. Summers, another senior White House adviser and director of the National Economic Council, told Jake Tapper, host of ABC's "This Week," that the "discouraged worker" effect is counterintuitive: "As you see progress in job creation, you tend to [assume unemployment will] go down. It's not quite as simple as some people think, Jake, because as conditions get better, more people decide to look for work and are counted as in the labor force. So sometimes it's frustrating and the progress doesn't show up immediately in the unemployment rate, but it's progress nonetheless in giving jobs to people who need them."

Ann Morgan, a 61-year-old Bladensburg resident, counts herself among the discouraged reentering the job market. Morgan lost her job as an administrative assistant for a government contractor 14 months ago. At first, she was so confident she'd find work that she didn't bother filing for unemployment benefits. But 60 unanswered résumés later, she was forced to sign up for the weekly $340 payments.

By fall, she was so frustrated by her fruitless search that she gave up looking. But, encouraged by friends who have found work, she dropped by an unemployment center Thursday to put out feelers. She is not alone.

Even though the number of jobs has grown, there are still about 5.4 job seekers per opening, according to economists. That number has declined from 6.2 in November, but it remains much higher than in earlier recessions. In September 2003, for example, it was 2.8.

Morgan, like many other unemployed people, is going through a difficult calculus: Stick with what she knows and wait out the downturn, or remake herself and gamble on what could be a hot job of the future. Her life, she said, goes in fits and starts, sometimes relying on odd jobs, cycling between hope, disappointment and desperation.

"I'm going to go back Monday and see what they're saying" at the unemployment center, she said. "If they can offer me training as a medical receptionist, I'll accept it. I'm hoping I don't have the same feeling of rejection."

Meanwhile, she'll become part of the official count once more, along with part of another burgeoning and often overlapping category -- the long-term unemployed who have been out of work 27 weeks or more. Their numbers reached 6.5 million in March, up from 6.1 million in February and 6.3 million in January, and their search for work is often burdened by uncertainty: Have the kind of jobs they once held disappeared forever?

Long-term unemployment has reached record levels in this downturn, according to the Bureau of Labor Statistics. In March, about 44.1 percent of the 15 million unemployed people across the country were out of work 27 weeks or more, up from 40.9 percent in February. The previous peak of 26 percent was reached in June 1983. About 20 percent of the people on the unemployment rolls have been out of work a year or longer, economists say.

Their circumstances exemplify the severe economic situation. In the past, people who lost their jobs could move to a better labor market in another part of the country. Not so now.

"People aren't able to sell their houses," said Heidi Shierholz, an economist at the Economic Policy Institute. "Homeowners are more locked into the labor market they're in."

David Neff, 42, of Bradenton, Fla., lost his job as a computer network administrator in 2008. Since then, he has applied for countless jobs in his field, with no success. He got licensed to sell commercial real estate last summer but has not had much luck. He is considering opening a business focusing on renewable energy, or perhaps going to school.

In the meantime, he has maxed out his credit cards and seen his home fall into foreclosure. He said he is dreading the day when he and his two children will be forced to vacate.

"I'm still putting resources out there, but I'm not hopeful," Neff said. "It's like throwing spaghetti at the wall."

With the exception of health care, even the experts can't tell what jobs and skill sets will be in demand and which won't.

"It's not clear to me who ends up on the short end of the stick in occupations that are no longer prevalent," said Christopher Woock, a researcher and labor economist at the Conference Board. "That's the hard part, figuring out where those new opportunities are going to be."

In June 2008, Dave Ellingsworth, 55, lost his marketing job at a Lasik eye surgery chain in Springfield, Mo. More than 100 résumés yielded only three interviews, but no offers.

With his unemployment benefits about to run out, he and his wife sold their house, two cars and most of their possessions. They bought a pickup truck and a trailer to live in and got a summer gig at an amusement park in Altoona, Iowa.

Both will make about $7.50 an hour, a fraction of what Ellingsworth made in marketing, he said, but it's better than nothing.

"I'm better off doing what I'm doing rather than staying there and chase an elusive job market," said Ellingsworth, who was speaking on a cellphone in his pickup en route to his new job.

Staff writers Perry Bacon Jr. and Michelle Singletary contributed to this report.

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