Hope Sinks: The Emotional Toll of Unemployment

(Feb. 23) -- More Americans are giving up hope they can find full-time work amid the persistently ailing U.S. jobs market, and that spells trouble for the very economic recovery that could help them.

Three surveys out Tuesday show consumer sentiment is down starkly from just a month ago thanks to job worries and illustrate the toll underemployment is taking on the economy: More consumer worry usually equals less spending.

A Gallup Poll of 20,000 adults in the U.S. work force indicated nearly 20 percent were working part time in January because they couldn't find a full-time job or had no work at all, and that they are having trouble affording basic necessities like food, shelter and health care. A second Gallup Poll found that 61 percent of the underemployed aren't hopeful they can find work in the next four weeks.

"The underemployment measures suggest that one out of five Americans is suffering psychologically," said Dennis Jacobe, the chief economist at Gallup. How people feel about the economy and their own personal lives is key factor in future spending, he noted. "The number has to be reduced dramatically for the economy to recover, at least on Main Street."

What's striking about the Gallup numbers is that the polls didn't even include people out of work so long they are no longer counted in the work force. The Labor Department reported this month that the number of people without jobs 27 weeks or longer continued to trend upward in January to 6.3 million, up by 5 million since the end of 2007. And among these are 1.1 million discouraged workers who weren't looking for work because they don't believe jobs are available for them.

Worries about unemployment are in turn discouraging spending even among the employed.

Americans are more pessimistic about the economy this month than they have been since last April, before the economy began to recover, according the Conference Board's Consumer Confidence Index.

"Consumer confidence, which had been improving over the past few months, declined sharply in February," said Lynn Franco, director of research at the Conference Board. "Concerns about current business conditions and the job market pushed the Present Situation Index down to its lowest level in 27 years."

That reading of how people judge current economic conditions was at 19.4, down from 25.2 in January. (A reading of 100 is nominally equal to how consumers responded in 1985 to the survey of 5,000 households.)

Consumers' expectations for the future also worsened, "with fewer consumers anticipating an improvement in business conditions and the job market over the next six months," Franco said. "Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."