March 25, 2015
My colleague Kevin Cashman and I recently released a new measure of unemployment called the “Jobless Rate”. The “Jobless Rate” takes account of all Americans who say they want a job but are unable to find one. While the official unemployment rate for February was just 5.5 percent, the jobless rate stood at 9.3 percent.
Jobless Americans can be divided into four separate categories. The Bureau of Labor Statistics (BLS) tracks the following groups of jobless workers (data sources are in the hyperlinks):
- Jobless Americans are counted as unemployed if they have actively searched for work within the last four weeks;
- Jobless Americans are counted as “discouraged workers” if they have searched for work within the past twelve months, but haven’t searched within the last four weeks specifically because they didn’t think any jobs were available;
- Jobless Americans are counted as “marginally attached workers” if they have searched for work within the past twelve months but not the past four weeks. Since “discouraged workers” are part of the “marginally attached” group, BLS publishes a measure looking at the number of “other marginally attached workers”, a group that excludes discouraged workers; and
- Finally, there are some jobless Americans who don’t fall into any of those other three groups. These are people who aren’t counted as members of the labor force but who say they would like a job. By subtracting the number of “discouraged workers” and “other marginally attached workers” from this group, one can determine how many Americans say they would like a job but haven’t applied for one within the past year.
Americans who fall into the group known as “discouraged workers” seem to be facing especially tough circumstances. These are people who were previously classified as “unemployed” but became so discouraged by their job prospects that they completely gave up the search for employment.
It’s well known that during the recession, unemployment and other forms of joblessness went up. But what’s rarely mentioned in public discourse is that the number of discouraged workers didn’t just increase; it actually shot up far more significantly than other forms of joblessness. On the eve of the recession in 2007, discouraged workers constituted 3.1 percent of the jobless population. In the year ending in February 2015, nearly six years after the end of the recession, they represented 4.6 percent of all jobless workers*:
Ideally, jobless workers would feel positive about their employment prospects and would continue searching for work. We would therefore like to see jobless workers being counted as “unemployed” rather than “discouraged”. Yet the ratio of unemployed workers to discouraged workers has actually been falling. As of December 2007, there were more than nineteen unemployed workers for every one discouraged worker; the ratio remained above nineteen through April 2009, but began declining immediately afterwards even as the economy recovered; last month it fell to less than thirteen. The number of unemployed workers is up 32 percent since 2007, but the number of discouraged workers is up 96 percent, nearly double the 2007 level.
This only adds to the argument that policymakers should place job creation front and center when crafting economic policy. You often hear members of Congress worrying about rising deficits, even though the deficit is falling; others talk about the risks of rising inflation, even though inflation is falling from already historic lows. (Also, expectations of future inflation imply that inflation will stay low going forward.) By contrast, an upsurge in the number of discouraged workers isn’t some phantom fear; it’s already happened. And sadly, many policymakers would rather obsess over invisible problems than address real ones. This tremendous increase in the number of discouraged workers should be at the forefront of all debates on the economy, and it’s sad—even discouraging—that is isn’t.
*Addendum: Because the BLS’s data on discouraged and marginally attached workers aren’t seasonally adjusted, I took 12-month moving averages of the unadjusted data for the number of unemployed workers, the number of discouraged workers, the number of other marginally attached workers, and the number of jobless Americans who didn’t fit into one of those three categories.
