For unemployed, statistics tell only part of story

Philadelphia telecom worker Darnel Tanksley can make a dead phone line come to life. James Lee, a resident of Munster, Ind., has a knack for running construction projects. And Jane McGuire of San Luis Obispo, Calif., is a master of cajoling software programmers to meet their deadlines.

But all three have put their prize skills aside: They're out of work - and have been searching for jobs for more than six months. That irksome predicament puts these three into one of America's fastest growing groups: the long-term unemployed. They are people so discouraged by the job search that they've just quit looking.

While every downturn has its downtrodden, this one is worse than most. The percentage of people not in the workforce has grown nearly every month since early 2001.

"This is not only painful for the individuals and their families; it's unhealthy for the country," says Bill Brock, a former senator and labor secretary. "People in this country like to work, to be productive."

Employment opportunities are an important part of consumer confidence - which Tuesday received an unexpected boost, due in large part to the quick end to war in Iraq. "It's a chicken-and-egg kind of thing: Jobs and confidence go hand in hand," says Stuart Hoffman, chief economist for PNC Securities.

For now, though, executives - unsure of demand - aren't hiring. Desperate people apply for jobs beneath their qualifications, resulting in a loss of productivity - and a panoply of wasted skills. Consumers, wary of their own job prospects, are holding off buying that new car.

As the so-called jobless recovery stumbles along, the number of long-term unemployed - now about 1.8 million - is up 36 percent from a year ago. The tally of discouraged workers - almost 500,000 - is up 44 percent.

The long-term unemployed and disheartened aren't just waiting a few weeks for their factories to call them back. It's more likely that their factories are permanently closed.

Many are white-collar workers with college degrees and sometimes advanced degrees, too. They may have been in the upper echelons of management. Some are still suffering from the collapse of the dotcom and telecommunications industries - but because of their expertise, they're reluctant to look for work in completely different fields.

In a woeful cycle, long-term unemployment begets long-term unemployment: With plenty of applicants to choose from, employers are less likely to hire someone who's been out of work for some time. "The longer the jobless recovery continues, the more people get caught up in a long-term job search," says John Challenger of Challenger, Gray & Christmas, an outplacement firm in Chicago.

In the wake of the 1990-91 recession, long-term unemployment likewise shot up. From peak to trough, that measure rose for about 18 months, says Randy Ilg, an economist at the Bureau of Labor Statistics in Washington. "And it continued to stay high for four or five months after that."

The job market did not truly start to grow until late 1993 or early 1994. And the four-year boom did not start until 1996. This Friday, the government releases the April employment report. "No one thinks there will be much of a gain in jobs," says Mr. Hoffman. "The economy really has to grow more than 3 or 4 percent to see a lot of job growth."

The hiring drought comes at a time when Congress is considering a renewal of extended unemployment benefits, which are set to expire at the end of May. It's not a given that Congress will do anything: In April hearings, the House Ways and Means Committee listened to experts who maintained that unemployment benefits may discourage people from searching for work. One witness held that unemployment compensation allows people to slow down their job searches or be more selective in accepting offers.

Advocates of the long-term unemployed defend those benefits. "The purpose of unemployment compensation is to let people stay out until there are jobs where they can be employed," says John Dodds, director of the Philadelphia Unemployment Project. "You don't want architects washing windows and telecom workers becoming janitors."

But that's exactly what Mr. Tanksley might do. After 18 months of looking for work, he's waiting to hear about an opening in Harrisburg, Pa. - or a job as a janitor at the local post office. "If the janitor job comes through, I'll have to take it, because it gives me benefits for me and my 11-year-old son," says Tanksley. "But I'd rather be working with wire. When something is broke, no one can fix it faster than me."

In the past, companies probably would have leapt to hire a trained worker like Tanksley. But these days, with so many people searching, they can be very selective in their hiring. This is particularly true for white-collar workers. "Three to five years ago, a company would post a job and get 10 to 20 résumés. Now they get 1,000," says Scott Kane, a partner at Gray Hair Management LLC, a Deerfield, Ill. firm that helps out-of-work clients hunt for jobs. "So they wait until the perfect candidate shows up."

Or until they hire someone from within. That, at least, is the experience of Chuck Heroux, the former president of a company that manufactured pipeline coatings. "A lot of companies are planning to fill from within, but they go out to see if someone with perfect talents is around," he says. "So there are a lot of job openings that aren't real jobs." After his company got bought out, the Illinois resident never expected to be out of work for 18 months.

Protracted unemployment sometimes makes workers reexamine their futures. Is it time to take courses at a local university? Or completely change careers?

That's what Ms. McGuire, out of work for seven months, is wondering: "It might be an opportunity to do something different, partly because the need for program managers in the technical field is not incredibly high."

So she's considering some gardening classes at Cal Poly University, in hopes of finding work with a grower. Although she has dozens of résumés out, including one with the county and the US Postal Service, she wants her next job to offer long-term prospects.

Although McGuire does not want to leave her area, many of those out of work for a long time are becoming more flexible - something placement companies say is important.

It's a lesson the Lee family has learned. Mr. Lee's wife had been working at Harrah's Casino in East Chicago, Ind., but got a better job offer when her husband was unemployed. Now, she works in Laughlin, Nev. And Lee declares: "I'm open to any opportunity within the 50 states. My wife took something 2,000 miles away, so we're very flexible."

• Anne Stein in Chicago and and Leila Wombacher Knox in San Luis Obispo, Calif., contributed to this report.