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January 19, 2014

Jobless rate masks troubles

Why many Georgia workers are giving up the hunt for a job
IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Atlanta Journal Constitution

By Michael E. Kanell

It's the nation's most closely followed economic statistic.

The unemployment rate in the United States fell to 6.7 percent last month, down dramatically from its double-digit peak at the height of the Great Recession. Georgia experienced a similar drop, though the jobless rate is still higher than the country's.

Yet those rosier numbers might not be the good tidings they seem to be.

Consider the case of Kelsey Hicks: The 26-year-old Lawrenceville woman hit a wall last spring after months of trying to find a job.

"I have been working since I was 14 or 15," she said. "I am not used to not working. But I was constantly being told that I was either overqualified or that I needed a master's degree."

Hicks is working on the degree at Mercer, but she's stopped looking for a job. Those in Hicks' situation --- discouraged to the point that they stop searching --- make unemployment numbers much more nebulous than politicians want to acknowledge.

Once Hicks started checking the boxes that signaled she's no longer in the hunt for a job, she disappeared from the economic landscape and is no longer counted among the unemployed.

As a group, the worst hit are young workers --- many of whom cannot even find their first jobs. But government surveys say millions of Americans in every age group have stopped looking.

That lowers the unemployment rate. It also cuts the proportion of people in the labor force --- something that has not happened before during a post-recession expansion.

In Georgia before the recession, the labor force was 68.1 percent of the total population. It has dropped to 62.4 percent --- the lowest proportion of the population in the labor force since early 1978, a difference that represents 430,000 people.

Where have the missing workers gone?

Some decided to create their own jobs. Hicks, for example, is now partnering with a Mercer professor hoping to put together a business that would offer college prep for younger students. Some people went back to school. Many older baby boomers reached retirement age and quit working earlier than they planned.

And a record number of people are on disability.

The result is a population that is not as productive as it could be, causing damage that is likely to be long-term to both individuals and the larger economy, said Barry Hirsch, labor economist at the Andrew Young School, Georgia State University.

"That is very bothersome," he said. "I am not troubled by retirement, but I am worried about the numbers of people on disability. ... Many of them are people in their 40s and 50s who are never going to come back to the workforce. And it is very expensive."

Merrill Matthews, resident scholar at the conservative, Texas-based Institute for Policy Innovation, said that a larger workforce itself adds to the economy's potential. Anyone who is working can pay taxes that will help fund assistance programs, as well as Social Security and Medicare.

"You are not going to have as many people paying into the big entitlement programs to make those programs more sustainable in the long term," he said.

If millions have stopped looking, many other discouraged job seekers continue to search even though they feel like throwing in the towel.

Michelle Moran, 53, of Buckhead, was laid off from her job as an editor more than two years ago. She occasionally lands a temp job or does some freelance work. She is burning through savings. And she is still hunting.

"It is just so frustrating," she said. "I haven't given up. I can't afford to."

But many people do. Labor force participation starting climbing in the 1970s as vast numbers of women started working. But it peaked during the 1990s boom and started declining after 2000.

Georgia --- which was hit harder than most states by recession --- went into the downturn with a higher-than-average rate of workers in the labor force, according to the state Department of Labor. But the state rate has fallen faster than the nation's and in the past two months has fallen below that of the U.S.

The state's job market hit bottom in 2010. Since then, the state has added about 150,000 jobs, while the labor force has grown only 22,000, according to the Bureau of Labor Statistics.

Despite the growth, the state remains 100,000 jobs shy of its pre-recession level in late 2007. And 106,392 fewer Georgians are in the workforce.

Many people would have retired and left the labor force anyway, even in a strong economy. Many retirements were delayed by the recessionary collapse of housing values and stock prices.

"Their wealth fell sharply, and that kept a lot of older workers in the work force," Hirsch said. "As the stock market and the housing market have recovered, at least partly, you are seeing a lot of older people retire."

But boomers' retirement isn't enough to explain the labor shrinkage, say most economists.

Even if you assume normal retirements, nationally "there are 5.9 million to 6 million workers who would be in the labor market but are not," said labor economist Jeff Wenger of the University of Georgia. "If those workers were counted in the official statistics, the unemployment rate would be 10.2 percent."

Tom Baley, 66, of Alpharetta, had been a highly paid tech executive and entrepreneur. But after selling his company, he struggled to find a position. He is teaching part time at Georgia State, having given up looking for a full-time job.

"A friend told me, 'Hey man, I can hire a 35-year-old to do the work for a third of your price.' And I said, 'Enough.'"

Michael Oppizzi, 56, heard the same thing from one of his friends: Younger people cost less.
Oppizzi, a Georgia native, lives in a Chattanooga suburb. A former pastor and salesman, he has looked in vain for consulting or sales jobs.

"I stopped looking, really, a couple of years ago, except the occasional interview," he said. "If it weren't for my wife and some little projects here and there, I don't know what I'd do."

What the economy needs --- and what job seekers need --- is an unemployment rate that is falling because there's a surge of hiring, not a flood of workers who have given up looking.

"Having a lower unemployment rate is not always a good thing," Wenger said. "In this case, it's a bad thing. It's horrible."


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