Why 512,000 Workers Are Discouraged

Discouraged workers are those who want and are available to work, but have dropped out of the labor force because they believe there aren't any jobs for them. In July 2018, there were 512,000 of them. They've looked for a job sometime in the past year, but not in the past four weeks. 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. 

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

Four Reasons Why Discouraged Workers Gave Up

There are four reasons discouraged workers gave up looking for work. First, most of them have been unemployed for so long that they don't believe there are any jobs for them.

Second, they don't think they have the schooling or training needed to get a good job.

A third reason is age discrimination. They say a potential employer thought they were too young or old. In 2016, there were 553,000 discouraged workers. Of those, 28.2 percent were 55 or over. That's double the unemployed who hadn't given up looking for work.

(Source: "Table 3. Employment Status of the Civilian Noninstitutional Population by Age, Sex, and Race," Bureau of Labor Statistics, February 8, 2017. "Table 35. Persons Not in Labor Force by Desire and Availability for Work, Age, and Sex," Bureau of Labor Statistics, February 8, 2017.)

Fourth, some believe they've been discriminated against because of their gender or race. In 2016, 62.4 percent of the discouraged workers were men. That's much higher than the 54 percent of men in the unemployed who didn't give up. 

What Discouraged Workers Are Doing Instead

What happened to the discouraged workers? A 2012 survey by the Richmond Federal Reserve found that 3.2 million stopped looking for work after a year of searching. Although they gave up, they would take a job if someone offered it to them.

Almost 50 percent of those not in labor force report they've retired. In 2012, workers age 55 or more were unemployed for 60 weeks on average. It was 42 weeks for all workers, according to the study. 

Fifteen percent of those that that dropped out were looking after a family member instead of looking for work. Some of these are men that have turned to childcare 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. That's more than the standard 4 percent of older workers. 

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.

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

More Definitions: Underemployed | Natural Unemployment Rate | Current Unemployment Rate