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Nobody expects anything great from the employment report for August. The Labor Department will offer an estimate of how many jobs were created or lost. Economists are forecasting something not very far from the 9.1 percent unemployment rate from the month before. That number is bad enough, but the hardest part of the employment picture may be people who are not reflected in that number.

NPR's Yuki Noguchi reports.

YUKI NOGUCHI: The unemployment rate this morning is expected to tick up slightly to 9.2 percent. Two years ago, the unemployment rate was nine and a half percent. And that sounds like an improvement.

But you have to look at the reason for the decline to know the whole story, says Howard Rosen, an economist at the Peterson Institute.

Mr. HOWARD ROSEN (Economist, Peterson Institute for International Economics): It's not because we're necessarily finding jobs for the unemployed. It is because people are dropping out of the labor force and no longer looking.

NOGUCHI: The operative word there is looking. The labor force, by definition, includes only those who are working or who are actively looking for work. If the number of people in the labor force shrinks, while everything else is held equal, the unemployment rate will look better. In other words, jobs don't have to be created for the unemployment rate to fall.

Rosen says a key reason the jobless rate has gone down slightly is that some people have retired early, they've gone back to school, or they're so discouraged they just gave up sending out resumes or knocking on doors.

Rosen says it's the first time in half a century that the labor force is decreasing. Baby Boomers are exiting the workforce. But even taking that into consideration, Rosen says in the past two years the labor force should have grown by nearly four million. Instead, it's decreased by 1 million. Rosen worries that the implication is not just lost productivity in the short term.

Mr. ROSEN: But over the long term, this really is a drag on the potential GDP growth of the economy; because as you lose the working force, that takes away from how much you can grow the economy.

NOGUCHI: Having people benched from the job market for protracted periods of time brings other problems. Christine Owens is executive director of the National Employment Law Project, a worker advocacy group.

To illustrate the problem, she tells the story of a 47-year-old Ohio man. He lost his job in a corporate restructuring two years ago, and hasn't had luck finding a new job. She says the man decided to keep paying his mortgage at the expense of some of his other bills.

Ms. CHRISTINE OWENS (Executive Director, National Employment Law Project): So now his bad credit rating is also affecting his employability. His mortgage company has been threatening to end his family's participation in a home mortgage modification program, even though they've been making the payments. And they've depleted all of their family savings.

NOGUCHI: Owens says The Ohio Man is a good example of how a bad job market can perpetuate itself. There are of course millions of people like The Ohio Man. He can't spend money because he can't find a job. Businesses around him aren't making money from people like him, and therefore they don't hire.

Ms. OWENS: It's hard to see how we can address the crisis we now face by just letting market forces work, because they are clearly not working.

NOGUCHI: These days, economists worry that the long-term jobless problem could create an entire lost generation of workers. People who stay out of work too long risk losing their skills, which makes it even harder for them to re-enter the workforce.

One way Owens and others say unemployed people can stay connected to the working world is by honing their skills through job training. Owens says such programs were successful after World War II. She says she hopes the president announces something that can help those discouraged workers come back into the workforce.

Yuki Noguchi, NPR News, Washington.

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