Will Improving Economy Bring Surge Of Job Seekers?

toggle caption Tony Dejak/AP

William Johnson, a graphic designer by trade, recalls with much bitterness the long, grinding job hunt that followed his 2007 pink slip in Milwaukee.

We're seeing people whose unemployment insurance has run out who are taking a more serious look at their prospects again.

"There were some people I emailed or called 10 or 15 times," he says. "After a few years of that, not hearing back from people ... slowly but surely I just sort of gave up."

Johnson, 44, is one of about 5 million jobless Americans who have stopped looking for work and are therefore no longer counted in the Department of Labor's monthly unemployment rate, which stands at 8.3 percent.

If that number included those discouraged workers, it would be closer to 10 percent. And if it counted the millions of people working part time because they can't find anything full time, the broader rate — known as U-6 — would be more than 15 percent.

As the U.S. labor market slowly improves and the economy gains traction, many frustrated job seekers will dust themselves off and start submitting resumes again.

How Many And How Fast?

In fact, there are signs it's already happening. Friday's jobs report shows that the labor participation rate edged up, meaning more people are looking for work. Meanwhile, Manpower, the country's largest employment-services firm, says it has seen a 20 percent to 30 percent increase in inquiries from job seekers in just the past few weeks.

"We're seeing people whose unemployment insurance has run out who are taking a more serious look at their prospects again," says Sunny Ackerman, vice president and general manager for major markets at Manpower.

But nobody seems to know exactly how many people will come off the sidelines or how rapidly they will move. If it happens quickly, it's possible the unemployment rate could edge up, because people who had dropped off the Labor Department's radar would suddenly be counted again.

Heidi Shierholz, an economist at the nonpartisan Economic Policy Institute, doesn't think workers will flood the market "until job prospects improve significantly" — and at the current rate of job growth, that could take years.

"We don't have some historical perspective to compare this to and go, 'OK, we know from experience that when the unemployment rate gets to X, or the number of jobs gets to whatever, that's when people will start coming back,' " she says.

The Role Of Demographics

Regardless of how many people re-enter the fray, they aren't likely to cause any major swings in the unemployment rate. A recent study by Wells Fargo Securities concludes in part that there's a natural attrition at work — baby boomers are retiring, moving out of the job pool and leaving a bit of room for others.

Economists also say many older people who lost jobs late in their careers are finding it hard to get rehired and may never come back. And many younger and middle-aged people, frustrated with their prospects, are hoping that more education may give them new, marketable skills.

Enlarge this image toggle caption Courtesy of William Johnson Courtesy of William Johnson

"A lot of these people have opted out of the labor market by going back to school or staying in school," says Nigel Gault, chief U.S. economist for IHS Global Insight.

That's where Johnson's path led him. Things got so tight financially that he was forced to move in with his elderly parents in Racine, Wis., where he became the primary caregiver for his ailing mother.

"I began to think, 'The heck with resuming a job search in graphic design, I'll see what I can do in health care,' " Johnson says. He's planning to cash in part of his retirement savings and go back to school to become a certified nursing assistant.

The two-year program will likely keep him out of the job market for some time.

'I'd Take Anything'

Younger, less educated job seekers have had it particularly tough since the downturn that began in late 2007. But even those who are middle-aged and hold advanced degrees have had difficulty.

Mindy Martin of Olympia, Wash., has a master's degree in counseling and lost her job three years ago.

"I'd take anything, really, that would offset the cost of child care and make it worth me being out of the home," says the 38-year-old mother of two young children.

Jobs in her field that once were advertised at starting salaries of about $32,000 a year are now being offered at minimum wage, Martin says.

In the meantime, she says the family has been scraping by on her husband's job, which is steady but not well-paying. They are current on their house payments but have racked up about $15,000 in credit card debt in the months since her unemployment insurance ran out.

Martin says she still looks at the job listings a few times a week, though she finds the whole process demoralizing.

"I am an optimistic person, so I like to imagine in five years that I will be doing something that will both pay the bills and is satisfying work for me," she says. "But my track record is not very good. I just don't know."

Slowly But Surely?

Azhar Iqbal, a co-author of the Wells Fargo report, says he is cautiously optimistic about the future for discouraged workers. The job market, he says, is slowly getting better.

"Once people have really grasped that, they will say 'OK' and get back in the market," Iqbal says.