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

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.

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By V. Dion Haynes
Monday, April 5, 2010

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.

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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.


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