At the Roosevelt Institute, Mike Konczal and Arjun Jayadev have an astonishing paper (PDF) closely examining the unemployment numbers and weakness in the labor force. The key finding:
Starting at the beginning of 2009 it is now more likely that someone who is unemployed will drop out of the labor force than find a job. This is a new problem for our economy, as this hasn’t happened as far back as data can be found (1967). These workers need targeted intervention before they become completely lost to the normal labor market.
This is a subject The Washington Independent has examined in the past: The unemployment rate has fallen not just because more workers have found jobs, but because hundreds of thousands of workers have stopped looking. If you have not actively searched for a job in the past four weeks, you do not count as jobless — instead, you count as someone “marginally attached” to the labor market, or “discouraged.”
But the Bureau of Labor Statistics’ monthly data does not follow individuals over time. Say a worker is on unemployment, then works for a month, then loses her job and does not search for a job for six months, then becomes unemployed again. We’ll know when that worker shows up in the unemployment rolls. But when she isn’t looking for a job, we won’t know whether it is because she found one, or because she isn’t choosing to look for one anymore, for whatever reason.
But Konczal and Jayadev use different data sets to suss out reemployment numbers:
Looking at the transition between not in the labor force to employed, we see that during these years, on average, 4.9 percent of the non-labor force found a job every month. Now that number is down to a disturbing 4.1 percent. At the same time, we see an increase in the percentage of people not in the labor force to unemployed — that number has skyrocketed from 2.6 percent a month in good times to 3.7 percent in 2010.[T]he increase in unemployed is largely a function of those who are out of the labor force not finding jobs. For example, students and young people who would normally be entering the work force for the first time are now transitioning to unemployed status.
Another major change is that the percentage of the unemployed who find a job has plummeted. Normally this number is very high in the United States. During 1994-2000 the number was 29.6 percent, which meant there was an almost 30 percent likelihood that someone looking for a job would be employed in the next month.
And here’s a chart showing the macro problem:
Why is this such a bad thing? For one, unemployed workers who stop looking for jobs tend to be financially distressed: This statistic implies a whole lot of human suffering. It means thousands of families ceding economic safety and sliding into abject poverty, often using social safety net programs of last resort, such as SNAP benefits. Additionally, such workers often swell the rolls of government programs not actually designed for them, like disability insurance. But more broadly, and more importantly, this is bad for the economy. It means that hundreds of thousands of workers, rather than paying taxes, producing goods and services and helping the country’s economy grow, are sitting idle.