Discouraged Workers and Economic Fluctuations

This article examines recent trends and cyclical changes in the number of discouraged workers and other persons outside the labor force who report wanting regular jobs. Both the incidence of discouragement and its sensitivity to labor market conditions vary widely across demographic groups. The number of persons discouraged for job-market reasons has shown marked cyclical swings, but not the number discouraged for personal reasons. The findings illumine one of the social costs of a slack economy and are relevant to the continuing controversy over the classification of discouraged workers as not in the labor force. The author also shows that recent pro-cyclical swings in the size of the labor force are much larger than can be accounted for by the entry and withdrawal of discouraged workers. He suggests that many persons who decide to enter the labor force when unemployment is low are not reported as discouraged workers—or even as wanting jobs—when unemployment is high.