Why Are 532,000 Workers Discouraged?

What Are They Doing Now and How Do They Support Themselves?

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After months of looking, it's easy to see how someone gets discouraged and quits. Photo: Hero Images/Getty Images

Definition: Discouraged workers are those who believe there aren't any jobs for them, even though they've looked sometime in the past year. In January 2017, there were 542,000 of them. That's more than 426,000 in December, but fewer than the 591,000 in November.

These are people who have given up looking for work. Why? Most of them have been unemployed for so long that they don't believe there are any jobs for them.

Others think they don't have the schooling or training needed to get a good job. Some report that their potential employer thinks they are too young or old, which is a hard-to-prove form of age discrimination. Others say they are victims of discrimination based on their gender, race or age.

Even though they've dropped out of the labor force, they would take a job if it were offered. In most recoveries, they would have returned to the workforce already. In this recovery, they haven't. 

Discouraged workers do not include those who have dropped out of the labor force for other reasons. These are people who have gone back to school to better their chances of getting work. Many women leave the workforce because they've gotten pregnant. Other people can't work because they've become disabled. Although they may indeed also feel discouraged, they aren't counted as discouraged workers. 

Who makes this determination?

The Bureau of Labor Statistics, a division of the U.S. Department of Labor. It's in charge of collecting data on employment and unemployment in America. (Source: "Definitions," Bureau of Labor Statistics.)

Even though they would like a job, discouraged workers are not counted as the unemployed or included in the unemployment rate.

However, they are counted in the real unemployment rate.

How Discouraged Workers Affect the Labor Force Participation Rate

The vast number of discouraged workers has reduced the labor force participation rate.  It fell during the Great Recession and hasn't recovered since. It's now where roughly it was in 1978. 

The LFPR fell from its peak of 67.8 percent in April 2000 to a low of 62.4 percent as of September 2015. It had dropped to 65.8 percent during the 2003 recession, but then rose to 66.4 percent in January 2007. What's happened is due in large part to discouraged workers, as shown in this chart.

 Date LFPR Change Discouraged  Workers Change Comments
Apr 200067.8%      331,000   
Jan 200565.8% Decrease     515,000IncreaseNormal pattern.
Jan 200766.4%Increase     442,000DecreaseAll still normal.
Dec 201064.3%Decrease  1,318,000Record highEffects of recession
Feb 201263.5%Decrease  1,006,000DecreaseWorkers didn't return to labor force. Many are too discouraged. Others have gone to school or retired. Some were forced to quit due their own or a family member's illness. 
Jan 201463.0%Decrease     837,000Decrease
Jan 201562.9%Decrease     682,000Decrease
Jan 201662.7%Decrease     623,000Decrease
Jan 201762.9%Increase532,000Decrease

(Sources: "Civilian Labor Force Participation Rate," St. Louis FRED. "Number of Discouraged Workers," Bureau of Labor Statistics.)

Why Have Discouraged Workers Dropped Out of the Labor Force?

Demographic changes affected the labor force even before the recession. First, Baby Boomers are aging. That means they are either retiring, staying home to care for ailing parents or spouses, or claiming disability themselves. Second, more students are staying in school longer, and fewer are working while they are in school.

Economists are divided on how much of the recent drop in the LFPR is due to the recession.

Estimates range from 30 percent to 50 percent to as much as 90 percent. Even the most conservative estimate says that the recession forced nearly a third of workers out of the labor force.

What happened to the discouraged workers? A 2012 survey by the Richmond Federal Reserve found that 3.2 million stopped looking after a year. Although they gave up, they would take a job if someone offered it to them. Another 80 million say they retired. It's unclear how many decided to say they're retired, rather than admit they are unemployable.

Fifteen percent of those that that dropped out are looking after a family member instead of looking for work. Some of these are men that, rather than say they can't find a job, have turned to child care instead.

Twenty percent of those aged 25 to 39 decided to go back to school. That's higher than the usual fifteen percent. Six percent of those aged 40 to 59 went back to school. It's greater than the standard 4 percent. 

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