America's Hidden Unemployed: Too Discouraged To Count

File photo of jobseekers standing in line to attend the Dr. Martin Luther King Jr. career fair held by the New York State department of Labor in New York.


WASHINGTON (Reuters) - When Daniel McCune graduated from college three years ago, he was optimistic his good grades would earn him a job as an intelligence analyst with the government.

With a Bachelor of Science degree from Liberty University in Virginia, majoring in government service and history, McCune applied for jobs at the National Security Agency, the Federal Bureau of Investigation and other agencies.

But after a long hunt that yielded only two interviews, the 26-year-old threw in the towel last fall, joining millions of frustrated Americans who have given up looking for work.

"There's nothing out there and there probably won't be anything for a while," said McCune, from New Concord, Ohio. He has moved back home to live with his parents, who are helping him pay off his college debt of about $20,000.

"I don't like it, it's embarrassing. I don't want to be a burden to my parents," said McCune, adding that he felt like a high school dropout.

Economists, analyzing government data, estimate about 4 million fewer people are in the labor force than in December 2007, primarily due to a lack of jobs rather than the normal aging of America's population. The size of the shift underscores the severity of the jobs crisis.

If all those so-called discouraged jobseekers had remained in the labor force, August's jobless rate of 8.1 percent would have been 10.5 percent.

The jobs crisis spurred the Federal Reserve last week to launch a new bond-buying program and promise to keep it running until the labor market improves. It also poses a challenge to President Barack Obama's re-election bid.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one has fallen by an unprecedented 2.5 percentage points since December 2007, slumping to a 31-year low of 63.5 percent.

"We never had a drop like that before in other recessions. The economy is worse off than people realize when people just look at the unemployment rate," said Keith Hall, senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia.

The participation rate would be expected to hold pretty much steady if the economy was growing at a normal pace. Only about a third of the drop in the participation rate is believed to be the result of the aging U.S. population.

SLOW PROGRESS

The economy lost 8.7 million jobs in the 2007-09 recession and has so far recouped a little more than half of them.

Economists say jobs growth of around 125,000 per month is normally needed just to hold the jobless rate steady.

Given the likelihood that Americans will flood back into the labor market when the recovery gains traction, a pace twice that strong would be needed over a sustained period to make progress reducing the unemployment rate.

Last month, employers created just 96,000 jobs.

Roslyn Swan lost her job in 2007 as a portfolio associate at a financial firm in New York. After submitting hundreds of applications, the 44-year-old is taking a break.

"Maybe after the elections," Swan said of her next attempt to get work. "I know that I will be employed again. I don't know when, but I know it will happen."

Americans of all ages are leaving the workforce, but the problem is most acute in the 20-24 age group, where the participation rate has plunged by 4.4 percentage points since December 2007.