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Dropouts: Discouraged Americans Leave Labor Force

People without a job who stop looking for one are no longer counted as unemployed. That's why the U.S. unemployment rate dropped in March despite weak hiring. If the 496,000 who left the labor force last month had still been looking for jobs, the unemployment rate would have risen to 7.9 percent in March.

"Unemployment dropped for all the wrong reasons," says Craig Alexander, chief economist with TD Bank Financial Group. "It dropped because more workers stopped looking for jobs. It signaled less confidence and optimism that there are jobs out there."

The participation rate peaked at 67.3 percent in 2000, reflecting an influx of women into the work force. It's been falling steadily ever since.

Part of the drop reflects the baby boom generation's gradual move into retirement. But such demographics aren't the whole answer.

Even Americans of prime working age â¿¿ 25 to 54 years old â¿¿ are dropping out of the workforce. Their participation rate fell to 81.1 percent last month, tied with November for the lowest since December 1984.

"It's the lack of job opportunities â¿¿ the lack of demand for workers â¿¿ that is keeping these workers from working or seeking work," says Heidi Shierholz, an economist at the liberal Economic Policy Institute. The Labor Department says there are still more than three unemployed people for every job opening.

Cynthia Marriott gave up her job search after an interview in October for a position as a hotel concierge.

"They never said no," she says. "They just never called me back."

Her husband hasn't worked full time since 2006. She cashed out her 401(k) after being laid off from a job at a Los Angeles entertainment publicity firm in 2009. The couple owes thousands in taxes for that withdrawal. They have no health insurance.

She got the maximum 99 weeks' of unemployment benefits then allowed in California and then moved to Atlanta.

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