Is the High Jobless Rate Due to the Return of Discouraged Workers to the Pool?

Question: Is there any [truth to the] idea that the jobless rate might have increased due to return of discouraged workers to the pool vs actual lost jobs?

Paul Solman: None. Not in the data.

“Discouraged workers” come in three flavors. One is the official designation: people who “have given a job-market related reason for not looking currently for a job.” The word “currently” means in the past 4 weeks.

Then there are “marginally attached” workers. They have looked for work sometime “in the recent past [past year] and “are available for a job.” (This group includes the “discouraged.”)

But then there are former workers who stopped looking more than a year ago. They’re considered out of the workforce entirely. Your question suggests that you think that it may be THESE people who began looking again, thus raising both the numerator (“unemployed”) and denominator (“workforce”) by the same amount, and thus upping the unemployment rate.

To see this, imagine a workforce of 3. Two people are employed; one is not, but has looked for work in the past week. Unemployment rate: 1 in 3 – 33 percent. Economy turns bad. One of the two remaining workers loses her job. Unemployment rate shoots up to 67 percent. But this former worker can’t find anything and becomes so disheartened, she stops looking. A year goes by. She’s considered to have dropped out of the workforce, which officially has only 2 workers left. One is employed, thus unemployment drops to 50 percent. If the disheartened worker were to begin looking for work again, however, the workforce would again swell to 3, with 2 out of work: unemployment back up to 67 percent. And that seems to be the scenario you’re suggesting.