unemployment duration still high

ALthough at much too slow of a pace the US economy continues to add jobs and the unemployment rate continues to drop.

Yet there are still BIG problems in the labor market. One of the most important is that people who are unemployed remain so for far too long. Today, half the people who are unemployed have been so for about 21 weeks. Although median unemployment duration has declined over  the past year, its still nearly twice as high as it was at the peak of the 2001 and 1981 recessions.

One of the important implications of increased duration is that the longer people are unemployed, the less likely they are to find a job. A recent report by the Bureau of Labor Statistics concludes:

“Undoubtedly, one of the most profound effects of the 2007–2009 recession was the shrinking likelihood of the unemployed finding jobs; even more dramatic was that the likelihood of finding work decreased substantially as the length of time spent searching increased.”

This is illustrated by the following chart, which shows the percentage of workers that find jobs in a particular month who have been unemployed for at least six months. Currently, it’s about 1 in 10.

The implications are many. From a cold, macroeconomic perspective, this is inefficient. The long-term unemployed are workers who could be producing something, but aren’t.

From a personal perspective, long-term unemployment is hard on families. Household finances get stretched; anxiety increases; and hope dissipates. Getting people back to work is the most important economic development issue.

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