The US labor market has been improving from dismal to sluggish, and the overall unemployment rate has been drifting down. But it's worth remembering that after five years of sustained high unemployment, the unemployed are disproportionately those who face the issues of long-run unemployment in a way that the U.S. economy has not seen in its post World War II experience.
Here's a snapshot of the unemployment rate over time, generated with the ever-useful FRED website
maintained by the Federal Reserve Bank of St. Louis. The sharp rise in
unemployment during the Great Recession is striking, but what I want to
focus on here is the amount of time that the U.S. economy has been
experiencing an unemployment rate above 7.5%. Draw a mental line across
the graph at 7.5% and take a look. The unemployment rate was above 7.5%
for (almost all of) 26 months from January 1975 to February 1977. It was
also above 7.5% for (almost all of) 51 months from May 1980 to August
1984. But since the unemployment rate rose above 7.5% in January 2009,
it's now been above that level for 54 months and counting. Also, the
graph shows that the spike in unemployment in the early 1980s was
"sharper," meaning that unemployment rates weren't at the very highest
levels then for as long a time as they have been in the last few years.
result is that a far higher share of the unemployed have been
unemployed for 27 weeks or more than at any time since the end of World
War II. In the past, the long-term unemployed typically made up 20-25%
of total unemployment during recessions. In the Great Recession, the
long-term unemployed were about 45% of the total unemployed, and the
share of total unemployment accounted for by the long-run unemployed
remains historically high.
similar pattern emerges when looking at the average duration of
unemployment. In past decades, this measure usually spiked up to about
15-20 weeks of unemployment in tough times. But in the aftermath of the
Great Recession, the average duration of unemployment spiked up to 40
weeks, and even now is at a historically sky-high 35 weeks.
A few observations here:
As someone on a college campus, where the undergraduates rotate in and
out over four years, we have now reached a situation where entire
classes of students have entered as freshmen during a terrible labor
market and exited as seniors into a terrible labor market. This
inevitably has an effect on how they perceive the costs and benefits of
college, how their families see it, and how rising high school students
2) It seems plausible that the long-term
unemployed have a harder time getting jobs than those who are more
recently unemployed. In part, this may be that the long-term unemployed
are less motivated or less attractive as employees--which is part of the
reason they are long-term unemployed. After all, unemployed workers
lose human capital: that is, they lose a chance for job experience and
to keep their skills updated. But in addition, part of the reason is
probably that employers make assumptions that the long-term unemployed
are less likely to be desireable workers. When the labor market has been
so poor for so long, such an assumption by employers is less
justifiable than it would have been in the past.
short, those who are currently unemployed, as a group, are more likely
to have experienced long-run unemployment than any previous group in
post-World War II U.S. experience. Re-integrating these workers into the
labor force is going to bring challenges and costs that I don't think
employers, government, or workers themselves have yet thought through.