Millions are disappearing from the unemployment rolls as they stop job search
Factor them in, and the nation's unemployment rate is nearly 12 percent
September 5, 2010 8:00 AM
AP Photo/Paul Sancya
By Ann Belser Pittsburgh Post-Gazette
There are 3.5 million people missing in the U.S.
Their families know them. Their neighbors see them come and go.
But 3.5 million people who should be in the labor force are no longer there -- and the government doesn't know what has become of them.
On the first Friday of each month, the Bureau of Labor Statistics reports the nation's monthly unemployment rate. The rate, which currently stands at 9.6 percent, is calculated by a telephone survey and is one of the barometers of the economy.
But the unemployment rate is understated because of the number of people who have just stopped looking for work.
"If all of those [3.5 million] people were in the workforce and unemployed, the unemployment rate would be 11.6 percent," said Heidi Shierholz, an economist with the Economic Policy Institute in Washington, D.C. Even that's not exactly accurate. She said in actuality some of the people re-entering the labor force would garner jobs while others would create their own jobs.
The better number, she said, is contained in a Bureau of Labor Statistics report that pulls together three groups: unemployed workers (those who have looked for a job in the last month); discouraged workers; and people who are marginally attached to the labor force. If those people were all considered part of the labor force, the unemployment rate would be 11 percent.
The fuzzy picture of what the American workforce is up to is not just a national phenomena. People have gone missing from the workforce in the Pittsburgh region, too.
Local unemployment numbers released Tuesday by the Pennsylvania Department of Labor and Industry showed that in the seven counties in the Pittsburgh Metropolitan Statistical Area, 9,600 workers stepped out of the workforce between May and July.
Mark Price, a labor economist with the Keystone Research Center in Harrisburg, said if the size of Pennsylvania's labor force had kept up with the state's population growth, there would be 80,000 more people in the Pennsylvania job market.
While the Bureau of Labor Statistics knows how many people have left the labor force, it does not track the reasons. For that, there is only speculation.
"Right now there is a very weak labor market, and the flows out of it are dominating," said Ms. Shierholz, who calculated the number of people missing from the labor force.
If you look at the labor force like a river lock, there are times when the water level rises because more water is entering than leaving. But at other times, valves are open and water in the lock drops. Right now the labor force is like that emptying lock.
Many of those people have left the workforce as Ian Stuart did.
Mr. Stuart, 66, of Monroeville, described himself as retired as he stood in line recently to receive free food from the Greater Pittsburgh Community Food Bank.
"I was a financial planner," he said, laughing. Earlier in his career he had been a research chemist.
Now, he said, he is competing with high school students for minimum wage jobs. He had a temporary position with the U.S. Census.
"I have an education. I finished college," Mr. Stuart said. Then, waving his hand to others who were in line, he said, "It's not like you're talking to people who have been sitting in corners drinking out of a paper bag."
His investments are gone and he is living on Social Security.
Other workers who have been unable to find work have left the labor pool to go back to school. Still more have given up and taken on roles caring for ill family members or children.
"These folks generally will not appear as long-term unemployed," said John Schmitt, econ- omist with the Center for Economic and Policy Research, a Washington, D.C.-based research firm.
To be counted as unemployed in the statistics, "You have to have no job and you have to be available for work and, most import- antly, you have to have looked."
People who are not reflected, he said, are then "the guy who loses a job at an auto parts plant in Ohio, then after a year or two, he just gives up looking."
There are good reasons for giving up. Each month the Bureau of Labor Statistics publishes results of its Job Opening and Labor Turnover Survey, comparing number of people seeking work with number of job openings.
The most recent statistics found five unemployed workers for every job opening. That was an improvement from November when there were 6.2 unemployed people for every opening. But when the recession started, there were 1.8 unemployed people for each job opening.
Unemployment is not the only problem. Declining wages are also taking their toll.
"A large number of people have taken jobs that pay less than the job they lost," Mr. Schmitt said.
In a report released Tuesday, the Economic Policy Institute noted the business cycle of 2002 to 2007, in which productivity grew by 11 percent, resulted in a wage decline of $2,000 for American families.
"We've seen a massive deceleration of wage growth," Ms. Shierholz said. "When there is a huge queue out the door, there is no reason for employers to raise wages."
When the team from the institute took into account the Consumer Price Index, real wages fell 1.4 percent over the last year for workers in nongovernment jobs.
"It's a buyers market," said Nancy Dolan-Brady, president of NDB Associates Inc., a Mount Washington-based executive recruitment firm. The salary someone may have started a job with three years ago is much higher than the salary that person would get now, she said.
The future is not looking bright, either.
Economists are forecasting the unemployment rate will remain over 7 percent well into 2014.
On the surface, the Pittsburgh metropolitan area looks as if it dodged the worst of the recession. In a ranking of large metropolitan areas, the region's unemployment rate is the 14th lowest, tied with Kansas City and Dallas/Fort Worth.
But Kansas City's unemployment rate is declining and that of Dallas/Fort Worth is steady. Pittsburgh's most recent rate was a full percentage point above this time a year ago, making it the 47th worst of the 49 large metro areas for year-over-year change.
Mr. Price said the recession hit here later but is still rippling through the economy. Still, he said, "It appears you got quite lucky." Then he added a caveat.
"It's still a tough labor market for anybody who lost their job in Pittsburgh."