How Many "Discouraged" Workers?

The good folks at the U.S. Bureau of Labor Statistics divide the adult population into three groups: the employed, the unemployed, and those out of the labor force. When an employed person stops working, if they are looking for work, they are counted as unemployed; if they aren't looking for work, they are counted as out of the labor force. This distinction makes conceptual sense: it would be peculiar to treat a 75 year-old retiree not looking for a job, or a stay-at-home spouse, as "unemployed." But there are obvious practical difficulties with these distinctions as well.  For example, "discouraged" workers who would like a job, but who have given up looking, will be counted as out of the labor force, although their situation looks more like unemployment.

So how many discouraged workers are there? Actually, the same survey that is used to count the unemployed can also be used to count "discouraged workers." In fact, BLS counts "discouraged" workers as one of two parts of an overall group of people who are "Marginally attached to the labor force."

Within the overall category of "marginally attached," the first subcategory of "discouraged" workers "[i]ncludes those who did not actively look for work in the prior 4 weeks for reasons such as thinks no work available, could not find work, lacks schooling or training, employer thinks too young or old, and other types of discrimination." The other subcategory of "other persons marginally attached to the labor force ... [i]ncludes those who did not actively look for work in the prior 4 weeks for such reasons as school or family responsibilities, ill health, and transportation problems, as well as a number for whom reason for nonparticipation was not determined."

Here's a graph of the data from BLS, which I made using the ever-helpful FRED tool from the Federal Reserve Bank of St. Louis. The bottom line shows the number of discouraged workers fluctuated around 400,000 from 1994 up to about 2008--a little higher in the aftermath of the 1990-91 and 2011 recessions, a little lower other times. But in the aftermath of the Great Recession, the number of discouraged workers spiked above 1.2 million, before falling back to under  million more recently.

The top line shows the broader category of "marginally attached" workers, which includes both those classified as "discouraged" and those who are marginally attached for other reasons. From 1994 it fluctuates around 1.5 million: higher in the aftermath of the 1990-91 and 2001 recessions, lower other times. But since 2008, it spiked up to 2.8 million, before dropping back to around 2.4 million more recently.

For comparison, the number of unemployed people (and remember, "discouraged" doesn't count as unemployed) was 12.7 million in March 2012. There were 865,000 "discouraged" workers in March 2012, and 2,352,000 in the total "marginally attached" category. Thus, if one wanted a broader picture of the labor market including both those officially classified as unemployed along with the discouraged, the total number of people in these two categories would have been would have been about 7% higher than official unemployment alone, at 13,565,000. If one wanted a broader picture of the labor market including both the unemployed and all of the "marginally attached," the total would have been 18% higher than official unemployment alone, at 15,052,000.

It doesn't seem right to treat the officially unemployed, who are actively looking for work, as in the same situation as the "marginally attached." But the high numbers of discouraged and marginally attached do demonstrate that the unemployment rate only captures one aspect of the weakness in U.S. labor markets.