Jobless Count Skips Millions

SAN FRANCISCO —  Lisa Gluskin has had a tough three years. She works almost as hard as she did during the dot-com boom, for about 20% of the income.

When Gluskin’s writing and editing business cratered in 2001, she slashed her rates, began studying for a graduate degree and started teaching part time at a Lake Tahoe community college for a meager wage.

It’s been a fragmented, hand-to-mouth life, one that she sees mirrored by friends and colleagues who are waiting tables or delivering packages. In the late ‘90s, the 35-year-old Gluskin says, “we had careers. We had trajectories. Now we have complicated lives. We’re not unemployed, but we’re underemployed.”

The nation’s official jobless rate is 5.9%, a relatively benign level by historical standards. But economists say that figure paints only a partial -- and artificially rosy -- picture of the labor market.

To begin with, there are the 8.7 million unemployed, defined as those without a job who are actively looking for work. But lurking behind that group are 4.9 million part-time workers such as Gluskin who say they would rather be working full time -- the highest number in a decade.

There are also the 1.5 million people who want a job but didn’t look for one in the last month. Nearly a third of this group say they stopped the search because they were too depressed about the prospect of finding anything. Officially termed “discouraged,” their number has surged 20% in a year.

Add these three groups together and the jobless total for the U.S. hits 9.7%, up from 9.4% a year ago.

No wonder the Democratic presidential candidates have seized on jobs as a potentially powerful weapon.

Howard Dean criticized President Bush for “the worst job creation record in over 60 years.” Richard Gephardt said that “I have three goals for my presidency: jobs, jobs, jobs.” John Kerry said “the first thing” he’d do as president would be to fight his “heart out” to bring back the jobs that have disappeared in recent years.

Bush, meanwhile, is quick to seize credit where he can. When the unemployment rate for November fell one-tenth of a point, he went out immediately to give a speech at a Home Depot in Maryland.

“More workers are going to work, over 380,000 have joined the workforce in the last couple of months,” Bush said. “We’ve overcome a lot.”

A number of economists say it’s a mistake to evaluate the job market solely by talking about the official unemployment rate. It’s a blunt instrument for assessing a condition that is growing ever more vague.

“There’s certainly an arbitrariness to the official rate,” says Princeton University economics professor Alan Krueger. “It irks me that it’s not put in proper perspective.”

On Jan. 9, when the rate for December is announced, both Republicans and Democrats will assuredly again maneuver for advantage -- precisely because the number isn’t expected to change much.

“At this point, where we don’t know which way it’s going but it isn’t likely to be going far, both sides will try to use it,” says Michael Lewis-Beck, a political scientist at the University of Iowa.

In every election since 1960, the party in the White House lost when the unemployment rate deteriorated during the first half of the year. If the rate improved, the party in the White House won.

That’s not a coincidence, says Lewis-Beck, who has edited several volumes on how economic conditions determine elections. “People see the president as the chief executive of the economy,” he says. “They punish him if things are deteriorating and reward him if things are improving.”

By any normal standard, things should have been improving on the employment front long before this point. More than 2 million jobs have been lost in the last three years, a period that encompassed a brief, nasty recession and a recovery that was anemic until recently. Even in the best-case scenario, Bush will end this term with a net job loss. That hasn’t happened to a president since Herbert Hoover at the beginning of the Depression.

Many economists are mystified about why a suddenly booming economy is producing so few jobs.

“We’re all sitting there and saying, ‘When are they going to return?’ ” says Richard B. Freeman, director of the labor studies program at the National Bureau of Economic Research. “It’s looking a little better, but we don’t understand why it isn’t looking a lot better. Why shouldn’t Bush be sitting there saying, ‘Man, I’m sitting pretty. This is a great boom’?”

One statistic proving particularly perplexing is the percentage of the adult population that is employed. This number rises during good times, as people are lured into the workforce, and falls during recessions as companies falter.

True to form, the percentage of adult Americans with jobs dropped from a high of 64.8% in April 2000, just as the stock market was cresting, to 62% in September -- the lowest level in a decade. If past recessions are any guide, those 5 million people who found themselves jobless should have driven the unemployment rate up to about 8%.

Instead, the rate never went much above 6%.

“More than half of the additional people who would have reported themselves as unemployed in a previous big recessionary period ... aren’t,” a puzzled UC Berkeley economist, Brad DeLong, wrote on his website. “They’re reporting themselves as out of the labor force instead.”

“Out of the labor force” means you’re not working for even one hour a week and don’t want to, either. It’s the traditional category for students, married women with young children, flush retirees and idle millionaires.

A new way that people seem to be joining this category is by getting themselves declared disabled. This designation makes them eligible for government payments while removing them from the unemployment rolls.

From 1983 to 2000, economists David Autor and Mark Duggan wrote in a recent study, the number of non-elderly adults receiving government disability payments doubled from 3.8 million to 7.7 million.

The scholars present a case that the sharp increase isn’t because the workplace suddenly became more dangerous. Instead, it has been prompted by liberalized screening policies, which make it possible to claim disabled status for, say, several small impairments as opposed to one big injury. Government examinations also have been downplayed in favor of the disabled’s own medical records and the pain he or she claims to be experiencing.

At the same time, benefits have been sweetened. As a result, millions of individuals who lost jobs now have an attractive -- and permanent -- alternative to searching for work.

Autor and Duggan concluded that if disability payments weren’t so appealing, many more people would be unemployed, boosting the jobless rate two-thirds of a point.

Another way in which people forgo an appearance on the unemployment rolls is if they decide to go into business for themselves. There are 9.6 million people who say they are self-employed full time, a number that rose 118,000 last month. Without the recent increase in self-employed, the jobless number would look much worse.

Many others may be working for themselves part time, temporarily, as a way to get food on the table in the absence of better options.

Take Steve Fahringer, who until recently was working for a Bay Area marketing agency that cut 20% of its employees and trimmed the wages of the remainder by 20%. Fahringer didn’t particularly like his job. Because the recession supposedly was history, he thought he could find a new position. The 34-year-old didn’t think it would be easy, but he thought it possible. So he quit.

“I left July 1,” he says. “I haven’t found a new job yet.”

It’s a common problem. The segment of the labor force that has been jobless for more than 15 weeks has risen nearly 150% since 2000. The current level is the highest since the recession of the early 1990s. Nearly one-quarter of the jobless have been unemployed for longer than six months.

In Fahringer’s case, he spent some time aggressively looking for a job, which made him part of the official July unemployment rate of 6.2%. Then he stopped looking, which meant that he was one small reason the rate started going down.

Instead of unemployed, Fahringer was classified as “discouraged.” A little more than 8% of the people who want a job in the Bay Area are estimated by the Bureau of Labor Statistics to be discouraged, slightly higher than Los Angeles/Long Beach but lower than the battered technology center of San Jose.

Discouraged workers have never been included in unemployment rates, although they came close the last time a commission met to reform the system, a quarter of a century ago. “It was a very hot issue,” remembers Glen Cain, a retired economist who was a commission member. He says the conservatives on the panel, who felt that anyone who really wanted a job should be out there hustling no matter what, prevailed.

Fahringer found an alternative way to earn a bit of money. He did some acrylic paintings, which he sold for a total of $1,000. He calls himself “a hobbyist,” which means for a while he moved out of the labor force entirely.

Now he’s a temp, assigned by his agency to a nonprofit office. For the first time in six months, he’s working 40 hours a week. By the government’s accounting, he has once again joined the ranks of the employed. But from the standpoint of his wallet, Fahringer is worse off: He’s earning less money, with no paid holidays, no sick leave, no pension plan, no health insurance, no future.

The Economic Policy Institute, a liberal-leaning Washington think tank, says Fahringer’s situation is in many ways typical. The industries that were expanding in the late ‘90s, including computer and professional services, paid well.

Those industries are in retreat. So is manufacturing, a traditional source of high wages. On the rise, meanwhile, are lower-paying service jobs.

During the boom, it was easy to trade up. Now it’s just as easy to trade down.

Fahringer’s solution: Opt out.

“I’m thinking of going back to school,” he says. “I’d take out a loan.” That would put him out of the labor force again.

In some eyes, a nation of burger flippers, temps and Wal-Mart clerks isn’t the worst scenario for the economy. The worst is that companies continue to eliminate jobs faster than they create them, setting up a game of musical chairs for the labor force.

That prospect alarms Erica Groshen, an economist with the Federal Reserve Bank of New York. “If you plot job losses versus gains on a chart, it’s shocking,” she says.

Losses are running at about the same rate they were in 1997 and 1998, two good years for the economy. But job creation in the first quarter of 2003 -- the most recent period available -- was only 7.4 million, the lowest since 1993.

“If this goes on too long, you’d have to worry there’s something fundamentally wrong,” Groshen says. Although the economy has picked up since March, “so far I haven’t seen anything that suggests job creation is picking up.”

That bodes poorly for Ian Golder. His last full-time job was with a start-up publication that wrote about venture capital.

Two years ago, Golder was laid off. It was the first time since he graduated from UC Berkeley 14 years earlier that he didn’t have steady work.

Golder looked for a while, gave up for a while, then landed a contracting gig with no benefits proofreading for a chip maker. When that ran out, he worked 20 hours a month on a financial services newsletter.

His wife, Heather, a recent graduate in English from UC Davis, also was without a job. They thought about selling their house in Sacramento and moving, but prospects didn’t look any better anywhere else. To make ends meet, they took in two boarders.

At the beginning of December, things seemed to improve a bit. Golder got a job in the document-control department of a medical devices company. The department, he was told, used to have 20 full-time people. Now it has five, plus four temps.

The job will last two months. After that, who knows?

“Optimists say things will be better then,” Golder says. “But a full-time position with benefits seems pretty remote.”