Where Do the Long Term Jobless Go? Not Into Jobs. (See: My Dad)

On the surface, the best news in last week’s generally positive employment data was the big fall in the number of “discouraged workers”—folks who want work but have stopped looking because they don’t see any jobs. From December 2010 to December 2011, that fell by 373,000, a big 28 percent year over year drop.

Figuring out what exactly this means is no simple thing. All the old cliches about statistics are doubly true about labor force data. If you’re looking for work, you’re “unemployed.” If you’ve stopped looking, you’re “discouraged.” But if you haven’t looked in the last year at all, you’re no longer “discouraged.” You’e not counted in the labor force. So what happened to all those discouraged workers? Did they find jobs? Or drop out of the labor force altogether?

Unfortunately the best bet here is door number two. The thing about discouraged workers is that they are (by definition) not looking for jobs, so they tend not to find them. Since December, 2010, the labor force participation rate has crept down by 3/10 of a percentage point, going from 64.3 percent of the population to 64.0 percent. That sounds like a small number, but it adds up to a lot of workers: if the labor participation rate had stayed the same, 815,000 more Americans would be working. That’s more than twice the decline in the number of discouraged workers.

Derek Thompson at The Atlantic has already pointed out the falling participation ratio.

Thompson thinks (or hopes?) that as the economy improves the participation rate is likely to go up. Or, says Thompson, the long-term unemployed who’ve fallen out of the workforce
will represent a kind of permanent shadow-group of people neither working nor counted as unemployed.

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