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You're reading: America’s hidden unemployed: Too discouraged to count

WASHINGTON, Sept 23 (Reuters) - When Daniel McCune graduated from college three years ago, he was optimistic his good grades would earn him a job as an intelligence analyst with the government.

With a Bachelor of Science degree from Liberty University in
Virginia, majoring in government service and history, McCune applied for jobs
at the National Security Agency, the Federal Bureau of Investigation and other

But after a long hunt that yielded only two interviews, the
26-year-old threw in the towel last fall, joining millions of frustrated
Americans who have given up looking for work.

“There’s nothing out there and there probably won’t be
anything for a while,” said McCune, from New Concord, Ohio. He has moved
back home to live with his parents, who are helping him pay off his college
debt of about $20,000.

“I don’t like it, it’s embarrassing. I don’t want to be
a burden to my parents,” said McCune, adding that he felt like a high
school dropout.

Economists, analyzing government data, estimate about 4
million fewer people are in the labor force than in December 2007, primarily
due to a lack of jobs rather than the normal aging of America’s population. The
size of the shift underscores the severity of the jobs crisis.

If all those so-called discouraged jobseekers had remained
in the labor force, August’s jobless rate of 8.1 percent would have been 10.5

The jobs crisis spurred the Federal Reserve last week to
launch a new bond-buying program and promise to keep it running until the labor
market improves. It also poses a challenge to President Barack Obama’s
re-election bid.

The labor force participation rate, or the proportion of
working-age Americans who have a job or are looking for one has fallen by an
unprecedented 2.5 percentage points since December 2007, slumping to a 31-year
low of 63.5 percent.

“We never had a drop like that before in other
recessions. The economy is worse off than people realize when people just look
at the unemployment rate,” said Keith Hall, senior research fellow at the
Mercatus Center at George Mason University in Arlington, Virginia.

The participation rate would be expected to hold pretty much
steady if the economy was growing at a normal pace. Only about a third of the
drop in the participation rate is believed to be the result of the aging U.S.



The economy lost 8.7 million jobs in the 2007-09 recession
and has so far recouped a little more than half of them.

Economists say jobs growth of around 125,000 per month is
normally needed just to hold the jobless rate steady.

Given the likelihood that Americans will flood back into the
labor market when the recovery gains traction, a pace twice that strong would
be needed over a sustained period to make progress reducing the unemployment

Last month, employers created just 96,000 jobs.

Roslyn Swan lost her job in 2007 as a portfolio associate at
a financial firm in New York. After submitting hundreds of applications, the
44-year-old is taking a break.

“Maybe after the elections,” Swan said of her next
attempt to get work. “I know that I will be employed again. I don’t know
when, but I know it will happen.”

Americans of all ages are leaving the workforce, but the
problem is most acute in the 20-24 age group, where the participation rate has
plunged by 4.4 percentage points since December 2007.

Many Americans typically start working in their teens,
taking part-time jobs after school and over summer vacations, a tradition that
is supposed to instill a work ethic. With many failing to secure jobs after
graduating from high school and college, analysts worry about U.S.

“Because of delays to their career, the skills set
accumulation that normally happens in the first or third job is not
happening,” said Paul Conway, president of Generation Opportunity in
Washington, a non-profit, non-partisan organization that works with 18- to
29-year-olds on economic issues.



Last month, the proportion of 20- to 24-year-olds in the
labor force was its lowest since 1972. Other age categories are faring little
better. The 25-54 age group has seen a decline of 1.8 percentage points since
December 2007.

Some, like 27-year-old Casey Potts, have gone back to
school. She is studying nursing in Kentucky after losing her medical sales job.

“If I had stayed in medical sales, I would be job
searching now,” said Potts.

But separate surveys by the Economic Policy Institute (EPI)
and Generation Opportunity found little evidence that young people were going
back to school when unable to land a job.

One deterrent is the rising cost of education and record
levels of student debt. About two-thirds of 2012 college graduates left school
in debt, owing on average $28,700 in student loans, according to Mark
Kantrowitz, publisher of

“Young people dropping out of the labor force to go back
to school would be a silver lining if it were true,” said Heidi Shierholz,
a senior EPI economist, adding that enrollment had gradually been increasing
for decades.

A Generation Opportunity survey published in August showed a
third of young people were putting off additional training and post-graduate
studies because of the sour economy.

“This is significant. People are making the decision to
put those off because the assurance of a return to investment is not
there,” said the non-profit’s Conway, a veteran observer of the labor
market as a former Department of Labor chief of staff.

He said his organization found that young people were doing
unpaid internships at nonprofit groups and businesses to prevent their skills
from atrophying. Others were joining the military.

Some economists say the participation rate does not paint a
true picture because people find work in the informal sector, ranging from
legal activities such as child care to crime in some cases.

“People are picking a buck here and there and not being
reported in anybody’s payroll,” said Patrick O’Keefe, head of economic
research at J.H. Cohn in Roseland, New Jersey.

“They will say they are not doing anything, even as
they have a job and are being paid under the table,” said O’Keefe, a
former deputy assistant secretary at the Labor Department. “We do not know
to what extent that is going on.”

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