Hiring up, but many jobless not looking

After 20 months of looking for work and sending out hundreds of résumés, Jeffrey Schwab has given up trying to find another job as a draftsman. He's now taken early Social Security and is considering whether to sell his Bellingham, Wash., home to move to something smaller. "From what I can tell, there's not much to look for," says Mr. Schwab, who has 35 years of pipeline-design experience. "I am standing around with nothing to do."

Even though the economy has created 1.2 million jobs since January, some 265,000 people have dropped out of the job hunt during the same period. They would join some 19.1 million Americans in the same situation as Schwab, who are unemployed and not looking for work largely because they are convinced they won't find it. This figure, at a record level, is up 44 percent from 10 years ago.

If the job market continues to improve, this large number of people could decide to get back in the job market - which would hold the unemployment rate relatively high, even as new jobs are created.

"If this flow of nonworking Americans were to reverse, it would send the jobless rate toward 8 percent," says John Challenger of the outplacement firm Challenger, Gray & Christmas in Chicago.

That would certainly be the case in Pennsylvania, agrees the state's governor, Edward Rendell (D). The official unemployment rate is 5.4 percent, but it's "much greater," Mr. Rendell says, when factoring in men who have been cut off welfare and never got back into the workforce "and as a result never show up in the unemployment rolls."

Sometimes a rising jobless rate, says Bob Brusca of Fact and Opinion Economics in New York, can be a positive sign of a vibrant labor market that's luring more people in than it can absorb. But "that change has not occurred."

Many workforce dropouts in the age group of 25 to 54 have spent years working in shrinking industries, such as telecommunications or software development. "There are many people who have been downsized - a permanent job loss - that are taking a long time to return to work," says Andrew Stettner of the National Employment Law Project in New York. "They have had such a hard time when they are looking that they have given up, even though they don't necessarily want to."

In Tiffin, Ohio, that's the case with Merree Phillips, who lost her job a year ago as a development officer at Heidelberg College. She says that at times frustrations sap her motivation. "Some weeks you don't work as hard since it's so easy to get discouraged and you wonder whether it's worth it to keep pounding your head against the wall," she says. "I have not gotten to the interview stage of any job I have applied for."

Ms. Phillips thinks that the job market is actually shrinking in her area. A year ago, she says there were 20 to 25 listings for professionals in the want ads in The Courier, a Findlay, Ohio, newspaper. Sunday, the online edition had only four such ads. "I don't want to come off as a slacker, but there aren't even any decent prospects," she says.

Some workers who have officially stopped looking are going back to school. Enrollment at the nation's community colleges, which offer much of the job retraining, is soaring.

One of those who has gone back to school is Penni Neff, a divorced mother of a teenage boy who lost her job at a hospital.

Now, she's in school to become a licensed practical nurse.

"Gee, I don't know why people throw their arms up and say 'I give up!' " she writes in an e-mail.

"Sorry, I'm not doing it, but I get doors slammed all the time," says Ms. Neff, who has four months left to finish her courses before she starts another training program to become a registered nurse.

Neff's move is probably in the right direction, says Mr. Challenger. "She's evidence of the migration of going from the old economy to the new, particularly jobs that are service-related," says the outplacement guru. He says other areas that the long-term unemployed should consider include international business, housing construction, real estate, utilities, and the energy industry. "People often pigeonhole themselves," he says. "We're seeing almost 50 percent of people changing industries, but not functions."

Challenger adds that hiring someone who has been out of work for a long time can be rewarding for employers as well. "[The new workers] are really hungry to get back, so you are getting someone who is really committed and is not going to move quickly as a free agent," he says. "You can save people's lives and get very committed employees that way."

A job would certainly help someone like Schwab in Bellingham. His wife, who was also laid off, is now working 30 hours a week at a store, but she does not get benefits. They are now considering all options, including the sale of their home. "We needed a bigger house to care for my wife's mom, who had Alzheimer's disease," he says. "But it's more expensive to pay for and heat."