No chance for leisure in current recession: SF Fed

Fri Jan 30, 2009 4:00pm EST
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By Ros Krasny

CHICAGO (Reuters) - Americans staggered by a massive drop in household wealth are not using the current recession to return to school or just enjoy a temporary break from the work grind, as many did in previous downturns, according to the San Francisco Federal Reserve.

"The decline in housing wealth and credit availability is nearly unprecedented," said economists Mary Daly, Bart Hobijn and Joyce Kwok in the bank's latest economic newsletter.

As a result, with less income sources to fall back on -- from home equity loans to credit cards -- labor market participation rates have held up, and even risen for some groups, relative to recessions in the early 1990s and in 2001, the economists said.

"In spite of declining labor market opportunities, more people actually are deciding to pursue them," they said.

The could cause unemployment rates to exceed forecasts, since many entrants into the workforce might be unable to find jobs, Daly, Hobijn and Kwok said.

The Labor Department, in its monthly employment report on Feb 6, is expected to say the U.S. jobless rate hit 7.5 percent in January for the first time since 1992.

The San Francisco Fed study showed that women aged 25-54 and men and women 55 or older have increased their participation in the workforce since December 2007, while young people (age 20-24) have not withdrawn to the same extent as in the 1990-91 and 2001 recessions.

"The decrease in the supply of credit to students and the decline in housing and financial wealth of their parents likely put pressure on young people to take jobs to pay for their studies," the economists said.   Continued...