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Jobless and Hopeless: The Real Story Behind the Unemployment Rate

Monica Davey with David Leonhardt

New York


Worn down by job searches that have stretched on for months, demoralized by disappointing offers or outright rejections, some unemployed people have simply stopped the search.

As the nation enters a third year of difficult economic times, these unemployed -- from factory workers to investment bankers -- have dropped out of the labor force and entered the invisible ranks of people not counted in the unemployment rate.

Some are going back to school or getting new job training. Others have chosen to stay home with young children or aging parents and to rely on their spouse's salary, at least for now. Still others are plainly waiting: living on their government benefits and hoping that the economy will get better in a while.

After working 25 years in the heat of the factory line at a steel plant here, Bill Jacobs accepted his layoff calmly last year. He thought he could find some other job working with his hands, or go back to the line once business picked up.

But eight months passed, and nothing came. Not long ago, he signed up for nursing school.
''There aren't any jobs, just not any,'' Mr. Jacobs said. ''I had been waiting it out. I thought there was a strong possibility that I'd get recalled to the plant, or I'd get something else, anything that paid at least $10 an hour. But it turns out there is nothing. It's a dead-end street.''

Mr. Jacobs, who is 50 and raising four children on his own, said he had ''absolutely never'' planned to change careers. But he heard about the possibility of a government grant to pay for his schooling and decided he would prefer to spend the next two years tucked safely inside a classroom rather than continue to fight for a job in an economy he describes as ''heading nowhere.''

Over the last two years, the portion of Americans in the labor force -- those who are either working or actively looking for work -- has fallen 0.9 percentage points to 66.2 percent, the largest drop in almost 40 years.

More than 74.5 million adults were considered outside of the labor force last month, up more than 4 million since March 2001, the Department of Labor says. They are people who fall outside the government's definitions of either employed or unemployed: they do not hold jobs, but they also have not gone out seeking work within the past month.

This group includes retirees and parents who have been home taking care of their children for years, but the surge of dropouts suggests that the jobless rate -- which was 5.8 percent last month, roughly where it has been for the past year -- offers an artificially sanguine picture of the labor market, many economists say.

''People use the unemployment rate as some kind of gauge of the health of the economy,'' said Robert H. Topel, a professor of economics at the University of Chicago. But because of the number of people now outside of the labor force, he said, ''the unemployment rate does not give you the same kind of information it did in the 1970's or 1960's.''

Job counselors say the trigger for the exodus is easy to see. Among those people whom the government considered unemployed, the average length of time out of work has been rising over the past two years, to 18 weeks last month from about 13 weeks two years ago.

In Pittsburgh, members of one support group for unemployed people have been jobless for so long that the group recently started holding separate conversations during their regular Monday night sessions just for those who have been out of work more than six months. More than 20 people usually show up.

''This is what we see today -- job searches that can take 6 to 12 months,'' said Charlie Beck, who has directed the support group, Priority Two, for the past 20 years. ''By six months, people really start to doubt themselves, and they start to doubt they're ever going to find anything. They start to doubt everything.''
Uncertainty crept slowly into Mike Guido's outlook. But after the third ''really good opportunity'' slipped away, ''it started to dawn on me,'' Mr. Guido said. ''It just wasn't happening. It wasn't going to.''

By then, nine months had passed since he lost his job as an engineer developing products for a Pittsburgh company that makes industrial and safety equipment. He had held the job for nearly 20 years and made an annual salary close to $50,000.

Mr. Guido asked around about academic jobs but was told his undergraduate and master's degrees would not be enough for an engineering post. At one point, a university professor told him he probably needed a doctorate.

''That was kind of a pivotal moment for me,'' Mr. Guido said. ''Right then, I started thinking, well, wait, what if I got a Ph.D?''

So last fall, Mr. Guido, 48, moved his books into a study desk off the long corridors of the University of Pittsburgh's engineering building and began learning again how to pull all-nighters for classes like Advanced Elasticity.

Mr. Guido worries about money. He has a 10-year-old daughter, a mortgage in the suburbs, a shrinking retirement account and newly opened student loans for what is likely to take him three years.
''This is definitely not easy financially,'' he said. ''The economy has sideswiped me.''

Still, Mr. Guido said he was pleased to be back in school, learning about things he cares about, and relieved to be on campus, far away from the struggle to find a job. There are others like him on campus: a soon-to-be furloughed US Airways pilot in the law school, a laid-off former sales manager seeking his M.B.A.

''It's funny,'' Mr. Guido said, ''how the moves you make because you think you have no choice can turn out to be good.''

Most people dropping out of the labor force are men, the Labor Department says, and the number of black men not looking for work has risen particularly sharply. Teenagers who were drawn into the labor force in large numbers in the late 1990's have also left it recently at a rapid pace. But frustration with the economy has cut across almost every demographic group. For the first time since the 1960's, the proportion of women in the labor force has declined over an extended period. In March, 60.6 percent of women 20 and older were in the labor force, down from 61 percent in March 2001.

Amy Richards, 30, was one of the big beneficiaries of the 1990's economy, making $150,000 a year in San Francisco working for MatchLogic, an Internet advertising company. When the company went bankrupt a year and a half ago, however, Ms. Richards was left with a pile of worthless stock options and no job.
She moved to Boulder, Colo., where expenses are lower, and she has been living off her savings. ''I decided to take a break, kind of get a breather,'' she said.

But the job market in Boulder is even worse than in San Francisco, Ms. Richards said. In fact, the Boulder metropolitan area is one of a few dozen where the surge in people considered to be labor-force dropouts helped decrease the unemployment rate last year even as jobs were disappearing, says Economy.com, a research firm in West Chester, Pa.

Others include Binghamton, N.Y.; Bloomington, Ind.; Florence, Ala.; Spokane, Wash; and Wilmington, Del.
Ms. Richards and a few friends from her old company are trying to start a business selling software to companies that charge for access to their Web sites. They are looking for their first investor and first customers. ''I don't know if there's another point in my life to pursue a dream and possibly come up empty-handed,'' she said. ''We may not get our company funded. It's a horrible capital market. I may have to end up doing something else.''

Other people are still dangling, ever so precariously, on the edge of the labor market. They are still filing job applications, but they acknowledge that their searches have slowed over the months, and even years. Many have begun to talk about giving up on the traditional job path. The question is where they will go.
Some talk of starting up businesses. Others say they may have to settle for anything soon, even a low-wage, part-time job anywhere.

Back here, in Pittsburgh, Janis M. Leftridge has spent her career first as social worker, then as a human resources manager, handling other peoples' problems. She is 56, and a whiz at designing business cards, writing résumés and leading discussions in her networking group about how to get a job. But her last job with the Bayer Corporation, where she made $76,000 a year, ended in 2001.

And in the two years since, she has emptied her savings. Last week, she was cheerily sorting out how she would pay the May rent.

''I'll figure something out, it'll happen,'' Ms. Leftridge said. ''But it's funny how, when you're younger, you don't think you'll find yourself in a position like this. I didn't think I'd ever be here.''

These days, she is spending less time sending out résumés. Instead, she said, she has begun to research a new option: working from her home, selling items like health supplements, dishwashing liquid and coffee beans through a direct marketing company. The company has also told her she can make money by recruiting other sellers, she said. She carries the company's glossy brochures with her. And she is trying some of the supplements herself.

''I've been trying to find a conventional job for two years,'' Ms. Leftridge said. ''Finally, I'm thinking about doing a home-based business. I don't see it as giving up. I see it as expanding my search. I ought to be able to make some money this way, and start building back my savings, in a situation where I'm not hostage to any company's budget, to any budget.''



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