Discouraged Job-Seekers
Mask True Jobless Rate

By Andrea Hopkins

WASHINGTON (Reuters) - For President Bush and his economic team, Friday's news that the U.S. jobless rate fell to its lowest level in more than a year must have looked heartening -- at first.
But a closer look at the Labor Department report told a far bleaker story, with 433,000 Americans categorized as "discouraged workers" -- those who have given up looking for a job because they have abandoned hope of finding one.
In December alone, Labor statisticians dropped 309,000 Americans from the labor force, no longer counting them as unemployed because they have stopped looking for work. That cut the participation rate to just 66 percent, a level not plumbed since recession-plagued 1991.
Economists believe the drop in the labor force masks a much higher jobless rate -- perhaps as high as 9 percent, according to Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio.
"The decline in the unemployment rate is the most misleading aspect of this employment report," said Chan. "It's a sham because of how we got there -- the labor force dropped precisely because more people became discouraged."
Usually, out-of-work Americans rejoin the job hunt as the economy strengthens, believing growth will spur hiring. But despite more than two years of expansion since the end of the 2001 recession, America remains locked in a jobless recovery and the labor force is falling, not rising.
Wells Fargo chief economist Sung Won Sohn said all the talk lately about the booming economy and rising stock market did little to persuade employers or job-seekers that their prospects were picking up as 2003 drew to a close.
"Despite all the hoopla, neither businesses nor potential employees have confidence in the economy. They're not believing all the stories about a strong and healthy economy given by the economists and the government," Sohn said.
"Economic growth is great, but the job market is lousy."
While the economy raced ahead at an annual rate of 8.2 percent in the third quarter of 2003 on the back of Bush's summer tax cuts and a booming housing market, job growth remains tepid. Since July, 278,000 nonfarm jobs have been created -- paling in comparison to the 2.3 million lost since Bush took office.
Sohn said many of the discouraged workers are likely refugees from the factory sector, where 2.8 million jobs have been cut in 41 straight months since the industry's last peak in July 2000. With many jobs gone forever to cheap-labor countries like China or India, workers have little hope of finding work that can compare with the $20-an-hour jobs they lost, Sohn said.
"People who lost jobs in manufacturing, especially some of the older workers, they look at the landscape and say, 'why should I waste my time?' And they simply drop out of the labor force," Sohn said.
Copyright © 2003 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.




This Site Served by TheHostPros