Unemployed Face Tough Competition: Underemployed

The U.S. job market is even worse than the 9.1 percent unemployment rate suggests.

America's 14 million unemployed aren't competing just with each other. They must also contend with 8.8 million other people not counted as unemployed -- part-timers who want full-time work.

When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.

And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work. Once they start looking again, they'll be classified as unemployed. And the unemployment rate could rise.

Intensified competition for jobs means unemployment could exceed its historic norm of 5 percent to 6 percent for several more years. The nonpartisan Congressional Budget Office expects the rate to exceed 8 percent until 2014. The White House predicts it will average 9 percent next year, when President Barack Obama runs for re-election.

The jobs crisis has led Obama to schedule a major speech Thursday night to propose steps to stimulate hiring. Republican presidential candidates will likely confront the issue in a debate the night before.

The back-to-back events will come days after the government said employers added zero net jobs in August. The monthly jobs report, arriving three days before Labor Day, was the weakest since September 2010.

Combined, the 14 million officially unemployed; the "underemployed" part-timers who want full-time work; and "discouraged" people who have stopped looking make up 16.2 percent of working-age Americans.

The Labor Department compiles the figure to assess how many people want full-time work and can't find it -- a number the unemployment rate alone doesn't capture.

In a healthy economy, this broader measure of unemployment stays below 10 percent. Since the Great Recession officially ended more than two years ago, the rate has been 15 percent or more.

The proportion of the work force made up of the frustrated part-timers has risen faster than unemployment has since the recession began in December 2007.

That's because many companies slashed workers' hours after the recession hit. If they restored all those lost hours to their existing staff, they'd add enough hours to equal about 950,000 full-time jobs, according to calculations by Heidi Shierholz, an economist at the Economic Policy Institute.

That's without having to hire a single employee.

No one expects every company to delay hiring until every part-timer is working full time. But economists expect job growth to stay weak for two or three more years in part because of how many frustrated part-timers want to work full time.

And because employers are still reluctant to increase hours for part-timers, "hiring is really a long way off," says Christine Riordan, a policy analyst at the National Employment Law Project. In August, employees of private companies worked fewer hours than in July.

Some groups are disproportionately represented among the broader category of unemployment that includes underemployed and discouraged workers. More than 26 percent of African Americans, for example, and nearly 22 percent of Hispanics are in this category. The figure for whites is less than 15 percent. Women are more likely than men to be in this group.

Among the Americans frustrated with part-time work is Ryan McGrath, 26. In October, he returned from managing a hotel project in Uruguay. He's been unable to find full-time work. So he's been freelancing as a website designer for small businesses in the Chicago area.

Some weeks he's busy and making money. Other times he struggles. He's living at home, and sometimes he has to borrow $50 from his father to pay bills. He's applied for "a million jobs."

"You go to all these interviews for entry-level positions, and you lose out every time," he says.

Nationally, 4.5 unemployed people, on average, are competing for each job opening. In a healthy economy, the average is about two per opening.

Facing rejection, millions give up and stop looking for jobs.

Norman Spaulding, 54, quit his job as a truck driver two years ago because he needed work that would let him care for his disabled 13-year-old daughter.

But after repeated rejections, Spaulding concluded a few weeks ago that the cost of driving to visit potential employers wasn't worth the expense. He suspended his job hunt.

He and his family are getting by on his daughter's disability check from Social Security. They're living in a trailer park on Texas' Gulf Coast.

"It costs more to look than we have to spend," he says.

Eventually, lots of Americans like Spaulding will start looking for jobs again. If those work-force dropouts had been counted as unemployed, August's unemployment rate would have been 10.6 percent instead of 9.1 percent.

Emma Draper, 23, lost her public relations job this summer. To pay the rent on her Washington apartment, she's working part time at the retailer South Moon Under. She's selling $120 Ralph Lauren swimsuits and other trendy clothes.

Her search for full-time work has been discouraging. Employers don't call back for months, if ever.

"You're basically on their timeline," Draper says. "It's really hard to find a job unless you know somebody who can give you an inside edge."

Retailers, in particular, favor part-timers. They value the flexibility of being able to tap extra workers during peak sales times without being overstaffed during lulls. Some use software to precisely match their staffing levels with customer traffic. It holds down their expenses.

"They know up to the minute how many people they need," says Carrie Gleason of the Retail Action Project, which advocates better working conditions for retail workers. "It's almost created a contingent work force."

Draper appreciates her part-time retail job, and not just because it helps pay the bills. It takes her mind off the frustration of searching for full-time work.

"Right now, finding a job is my job," she says. "If that was the only thing I had to do, I'd be going insane. There is only so much time you can sit at your computer, sending out resumes."