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Shrinking labor force a sign of discouraged workers

Clark, Champaign numbers reflect a state and national trend.Younger workers could end up years behind the normal career path.

The size of the workforce in Clark and Champaign counties is shrinking as discouraged workers quit looking for jobs, younger workers leave the state and others stay in school instead of entering the labor force.

Experts said the shrinking labor force mirrors a statewide and national trend that accelerated during the worst years of the Great Recession. The number of Ohio workers who have left the workforce may also be masking the state’s unemployment rate, and it points to signs that younger workers in particular are having a harder time getting good jobs.

Younger workers can suffer the most if they drop out of the work force, said Keith Hall, a former commissioner for the federal Bureau of Labor Statistics who wrote a report on the state’s shrinking labor force this year.

“There’s lots of evidence from past recessions that if you’re unlucky enough to graduate during a recession, that you can be behind in your career for literally as long as 20 years,” Hall said. “This recession has been so deep and the recovery has been so bad this could really be a big issue.”

The size of the civilian labor force was estimated at about 20,800 in Champaign County in 2007 but dropped to 19,400 in 2012, a decrease of 6.7 percent. In Clark County, the labor force included about 70,600 workers in 2007, but was 67,700 by 2012, about a 4 percent decrease, according to labor market information from the Ohio Department of Job and Family Services.

“One of the notable things about this recession is the labor force has really declined,” Hall said.

Hall said Ohio’s labor force participation rate – the percentage of residents 16 and older who are either employed or actively looking for work – was close to 67 percent at the beginning of the recession. That figure is now closer to 63 percent.

“That’s down well over 300,000 people,” said Hall, now a senior research fellow at George Mason University. “And one of the things that does, of course, is it created problems because you don’t have people working. But it also makes the unemployment rate in a sense give you false signals.”

Ben Johnson, a spokesman for the Ohio Department of Job and Family Services, also pointed to evidence that despite the recent economy, signs show that the size of the labor force is beginning to stabilize. Along with the short-term figures, he said there is also a long-term trend that the size of the labor force nationally peaked years ago and has slowly begun to taper off.

“It went up in the first half of 2013 and is coming down again, but it is not that precipitous drop we had seen during the recession,” Johnson said of the size of the state’s labor force. “That was a rapid decline, and of course we’re still too close to know what exactly is going to come next. All we can say at this point is it appears it has stabilized somewhat.”

Although the state collects information on the number of workers in state, the figures do not necessarily explain why residents are leaving the workforce, Johnson said.

“There are likely many reasons and, especially in the immediate aftermath of the recession, many of those reasons were probably tied to the economy,” Johnson said. “But we don’t know if you were just discouraged, or if you decided to go back to school, or if you took an early retirement or made some other decision that removed you from the labor force.”

One of the results of residents who quit looking for jobs, Hall said, is it makes the state’s unemployment rate look better than it really is. For example, the unemployment rate can shrink not only because more people are finding jobs, but because fewer people are actively looking for work.

The state’s unemployment rate was 7.3 percent in August, for example. But Hall said the real number could have been closer to 12.2 percent in Ohio if residents who have left the workforce for various reasons were included.

Hall said, “There’s just too many people who are sort of discouraged and not looking for work. So it makes these numbers seem a little bit better than they are.”

There are many reasons the local workforce might be shrinking, said Lehan Peters, deputy director of WorkPlus of Clark County.

With the recession, many students might choose to stay in school instead of entering the workforce. Tight budgets and few available jobs led to many teachers seeking work in other states. Peters estimated as many as 30 percent of residents who seek assistance at WorkPlus do not have a high school diploma or its equivalent, and they can get discouraged easily when it becomes hard to find a job.

Various groups, including the chamber of commerce, local schools and workforce development officials, are trying to find ways to get workers the training they need to stay engaged and ultimately find work. Among them, Peters said, agencies are working with local businesses to create internships and on-the-job training to make sure area workers have the education and training they need.

“Once they’ve graduated, if they have other certificates or are part of a skilled trade, they’re more marketable if they’re going into different industries,” Peters said.

The labor force participation rate, which has begun to decline since it peaked in 2007, is a long-term trend that is likely to continue to fall as the baby boomer generation ages, said Lewis Horner, assistant bureau chief of labor market information for the Ohio Department of Job and Family Services.

The recession is likely playing a significant role in the short-term trend of a smaller labor force, Horner said, but it won’t be clear until the economy begins to pick up speed.

“The only way we’ll really know for sure is if the economy takes a good uptick, and then we see an increase in jobs and we see what happens with people returning to the labor force,” Horner said.

The statistics don’t explain why, but Horner said the percentage of workers 65 and older in the workforce has also been slowly increasing throughout the recession, and at a higher rate within the last year or so. There is some evidence it may be because many employees lost income or savings during the recession and are working longer to recover some of those losses.

For employers, that trend may have some benefits, Horner said. Before the recession, there was a concern that if baby boomers started to retire at the same time, a labor shortage would ensue and slow the economy.

But that’s not good news for younger workers who face difficulty entering the workforce and additionally have trouble getting better jobs as their careers continue.

“You imagine this line of workers from entry level to retirement, and this line has just really slowed down its movement,” Hall said. “And so young workers get this second hit of being sort of stuck in the early stages of their careers without having people move along to get normal promotions and salary increases.”

In Clark County, Peters said she expects many baby boomers to continue working, but possibly only part-time in the coming years, as employers look for ways to keep experienced workers on the job until new employees can be trained. She said the county needs to make sure there are enough skilled employees in place to fill vacant jobs in the future, if there is an exodus of older workers.

“I think the retiring of the baby boomers, we are going to see thousands leave the workplace,” Peters said. “That is very alarming, knowing we don’t have the skill set in line to be able to fill those jobs.”

Some signs show the size of the workforce might be stabilizing, said Amy Donahoe, director of hiring and employer services for the Greater Springfield Chamber of Commerce. She said there are jobs available locally, particularly in entry level and intermediate openings.

A state jobs report released last week also showed Champaign County added about 200 jobs and 200 more employees to its workforce.That could be a sign that more people are entering the workforce as jobs become available, Johnson said.

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