Discouraged workers may hold the key to recovery


It's a bit of a chicken and egg scenario. Without a sustained recovery the millions of talented - but now out-of-work and "discouraged" - workers who have given up on looking for work are unlikely to be tempted back. But without their input, productivity and involvement, a sustained recovery will be much harder to come by.

Research from The Conference Board has suggested that one reason for the current conflicting signals from the U.S jobs' market, with employment and unemployment both rising in January, is this issue of "discouraged" workers.

These are the workers, now estimated to total well over one million, who would like a job, were (once) actively looking for a job but, after knock-back after knock-back, have now given up and are sitting at home "discouraged".

And these individuals are unlikely to re-enter the fray until the U.S labor market starts to send out strong signals of recovery, the Conference Board added.

The percentage of unemployed people who have been out of work for 27 weeks or more has, so far, continued to rise in the U.S and is now running at more than 40 per cent.

Unless significant structural change in the economy resulted from this recession, many of these long-term unemployed could find their skills simply are not needed in the recovery work force.

This could mean employers and managers experience a period where the unemployment rate remains relatively high – with all the social and financial confidence issues that this brings – until these individuals re-tool or find alternative employment matches for their skill sets, advised the research. Moreover, the fact that temporary rather than permanent employment is continuing to rise does appear to suggest that hiring managers are not convinced a sustained recovery is yet underway.

"We'll experience more months of these mixed signals before the labor market reaches sustained recovery," cautions Christopher Woock, researcher, human capital at The Conference Board and co-author of the report.

"In the months to come, like in past recoveries, we expect 'discouraged workers' to be a factor contributing to the labor market's complexity," he added.

"The labor market complexity reflects people in transition. The high number of long-term unemployed and individuals working part-time for economic reasons, coupled with the likelihood that many employers remain uncertain that the economy is firmly on a recovery path, suggests we could be in for a long, slow labor market recovery," he concluded.