Americans Are Giving Up Looking for Jobs

The United States unemployment rate sits at 4.2 percent, but that number may not tell the whole story. More Americans are giving up on their job searches because they feel hopeless about finding work. When someone stops looking, the government no longer counts them as unemployed. Economists say this is hiding a bigger problem in the job market.

People who stop searching for jobs are called 'discouraged workers.' In June, about 499,000 people said they quit looking because they believed no jobs were available for them. A wider group, called 'marginally attached workers,' includes anyone who wants work but hasn't searched in the past four weeks. That group reached about 1.83 million people in June — the highest level since November.

Heather Long, a chief economist at Navy Federal Credit Union, said the June jobs report had some surprising data. She pointed to a sharp drop in the number of people participating in the job market. She noted that one month doesn't prove a lasting trend, but the change is still a reason for concern.

Jeff Roach, a chief economist at LPL Financial, said it is hard to explain why the unemployment rate fell when so few jobs were actually created. In a strong economy, a low unemployment rate usually comes with more people actively searching for work. 'That's not the case now,' Roach said.

The government agency that tracks jobs, the Bureau of Labor Statistics, does not include marginally attached workers in the official unemployment rate. That's because the rate only counts people who are actively applying for jobs. This means there is a hidden group of jobless Americans the headline number does not capture.

Long said the job market has been difficult for about a year. Some older workers have chosen to retire early rather than keep searching. Many mothers of young children are struggling to find flexible jobs, like remote or hybrid roles. 'It's been tough for job-seekers for a year now, and that has caused some people to give up on their job search,' Long said.

Another sign of a slowing job market is how long it takes people to find work. Right now, layoffs are not very high, but hiring is also very low. Economists call this a 'no hire, low fire' environment, meaning people with jobs are likely to keep them but people without jobs are struggling to find new ones.

Job growth has slowed a lot compared to the years right after the COVID-19 pandemic. Long said that last year, almost only healthcare was hiring. This year, some office jobs and a few construction and warehouse positions have opened up, but most industries are still not adding many workers.

When people leave the job market, the unemployment rate can fall even if things aren't actually getting better. The gap between the official rate and the real picture keeps growing. The rise in discouraged workers and the drop in participation all suggest the job market may be weaker than it appears.