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Maybe Long-Term Unemployment Isn't the New Normal

Allison Linn, NBC News
Friday, 8 Feb 2013 | 8:22 AM ET
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Long-term unemployment may not be the stubborn problem we thought it was.

Some economists say there are signs it could ease in the next few years as the economy improves, raising hopes for the millions of Americans who have spent months or even years looking for work.

"There have been some improvements in the job prospects for the long-term unemployed, and while it remains a very severe social and economic problem in this country, it's not an intractable problem," said Rob Valletta, research advisor with the Federal Reserve Bank of San Francisco. "There are glimmers of hope."

About 4.7 million American jobseekers, or 38.1 percent of all unemployed people, had been out of work for six months or more in January, according to the Bureau of Labor Statistics. That's more than four times the number of people who had been out of work that long five years ago, just as the Great Recession was getting under way.

The recession officially ended in June of 2009, but job growth has remained painfully slow during the weak economic recovery. That's meant that people who lose a job are often in for an arduous task when it comes to landing a new position.

The median duration of unemployment is currently 16 weeks, according to the Bureau of Labor Statistics. That's down from a high of more than 24 weeks in mid-2010, but still around double what it was in 2007.

The large number of people who are out of work for months or even years has caused some people to wonder whether long-term unemployed workers will ever find new jobs.

US Unemployment Is Structural, Not Cyclical
Adolfo Laurenti, MD & Deputy Chief Economist, Mesirow Financial says U.S. unemployment is a structural rather than cyclical problem. He expects Friday's payrolls data to show 150,000 to 175,000 jobs were created in January.


But Valletta said his analysis of government data shows that as the job market slowly improved, even some who have been out of work for a long time finally landed a new position. The problem may have more to do with cyclical economic issues, therefore, and less to do with structural changes in the economy, such as a big shift in how many workers are needed in certain fields.

Valletta thinks that long-term unemployment will likely still be a problem for at least several more years. But, he doesn't think it will last forever.

"It's not a permanent problem," he said.

Not everyone is so optimistic. Sylvia Allegretto, a research economist with the Institute for Research on Labor and Employment at UC Berkeley, noted that despite several years of tepid economy recovery, the job market has continued to grow at a snail's pace. That means there are still millions fewer jobs out there for people who want a job.

The unemployment rate was at 7.9 percent in January, and 12.3 million people were unemployed and actively looking for a job.

With unemployment still at crisis levels, she argued that it may be premature to say whether the problem of long-term unemployment will work itself out as the labor market improves.

"It's far too early in the labor market recovery to separate out whether this is now a structural problem," she said.

Valletta's research also delved into who has been out of work for a long time, part of an effort to understand whether the long-term unemployed are suffering from a structural problem that is keeping them from finding new work. His research found that workers of all walks of life, from construction workers to those in financial services, have had a tough time immediately finding a job.

"They're a very diverse group, and what that suggests is that there's not some lump of long-term unemployed out there that are different from all the other unemployed," he said. "Instead, the long-term unemployed are long-term unemployed largely because of bad luck and a very hard labor market."

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