Long-Term Unemployment: A Weak Link in a Fragile Recovery

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Joe Raedle / Getty Images

People at a job fair in Miami, Fla. on May 2, 2013.

The 2008 financial crisis has left us with no shortage of economic problems, but among the most worrisome is the scourge of long-term unemployment. Though the official unemployment rate has fallen from more than 10% in October 2009 to 7.4% today, the labor market remains a brutal place for the 4.2 million long-term unemployed, whom the Labor Department defines as workers who have been out of work for six months or more.

This trait distinguishes the 2008–09 recession from past downturns. At the depth of the recession we experienced in the early 1980s, for example, just 25% of the unemployed were without jobs for more than six months. Four years into our current recovery, that number remains close to 40%.

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So what accounts for this? The Urban Institute is publishing a series of papers today on the issue overseen by economist Gregory Acs. Acs says the No. 1 culprit has been the overall limpness of the economic recovery. Even though we have seen a significant decline in the unemployment rate, overall economic and job growth has been muted. One statistic that illustrates this is the percentage of the total population that is employed, which has remained depressed despite the uptick in the unemployment rate:

US Employment-population Ratio Chart

The reasons for this are twofold. One is that worker productivity has been growing more slowly than in the past (meaning the amount of work per worker isn’t rising as fast). The other is that many “discouraged” workers are dropping out of, or never joining, the workforce — so they aren’t counted among the unemployed.

In other words, Acs says, the decline in the unemployment rate has overstated the strength of the recovery — and the economy has simply not grown fast enough to convince enough employers to hire someone who hasn’t held a job in six months or more.

Why this is truer than in the past — why, that is, employers have been less inclined to hire the long-term unemployed than other unemployed workers — remains somewhat unclear. But it is a fact: Wharton management professor Peter Cappelli has written about research showing that job applicants who have been unemployed for a month or more are much less likely to get a response from employers. It would appear that employers are simply using the length employees are out of work as a mental shortcut for how valuable they would be.

In fact, there isn’t any reason to believe workers who have been out of work for six months, or even longer, are less valuable than the continuously employed. Writes Cappelli:

The way to get hiring of the long-term unemployed started is to recognize that there is no objective case in this economy for not considering a candidate who has been out of work for a while. Therefore, excluding them out of hand is a form of prejudice. The people at the top of organizations need to point out that excluding such candidates is likely costing us money because we are ignoring potential good hires, just as it costs us money to exclude women, minorities, older individuals and anyone else who has the potential to do the job.

Who are the long-term unemployed? The Urban Institute’s research shows that the common presumption that the long-term unemployed are mainly older workers from specific industries like manufacturing doesn’t reflect reality. In fact, the long-term unemployed are fairly evenly distributed across the age and industry spectrum, with the notable exception being the construction industry. (Construction workers are both much more likely to be long-term unemployed and newly employed, which indicates both the severity of the housing slump, and the extent to which the nascent real estate recovery is generating jobs.)

In short, the long-term-unemployment problem appears to be an extension of the larger employment crisis in America, and one that’s been masked by a falling unemployment rate. The long-term unemployed are simply those workers who are a little less lucky, or a little less valuable to employers than the rest of the unemployed workforce. And the solution to the employment crisis is only going to be solved by faster growth. As Acs tells me, “We wouldn’t be having this conversation if the economy were growing at 4%.”

It’s a shame that a paralyzed Congress can’t seem to agree on any policies that might help our convalescent job market. But it would also appear that the private sector is helping to compound the bad luck of the long-term unemployed by not considering them for the jobs that are open.

MORE: America’s Productivity Problem

26 comments
JohnCrane
JohnCrane

This has been explained to the left yet they insist to ignor it, everything is good in OZ because the wizard told us it was.

skigoddess913
skigoddess913

Another nuance of labor participation rate being low: the current Federal income Tax Is structured to penalize succes. Serious demotivator to couples who are both high earners.

I know of several highly employable people, who remain unemployed by choice because of the higher tax bracket they would be in. Spouse makes enough to throw the couple onto the highest bracket, so the 2nd spouse would be working a 45+ hour week for only a net 60% of their salary.

Is it worth the time? Does it make more sense to get rid of the unnecessary services you pay for when you both work full-time, such as. : home maintenance, day care, cut down on clothing expense (work wardrobe, dry cleaning), down -size or eliminate 2nd car, cut back on travel budget, garden and co-op with your neighbors for some food? When you take this all into consideration, you might come out even, or even Ahead, with more quality and active time on your hands.

Definitely impacts the economy by lower demand on consumption for goods and services.I am one of these, and i am not alone. I refuse to go back to a 45-50 hour weekly grind, just to hand over at least 40% of my pay over to this irresponsible government. Especially when I know half of our population is payng no or almost no Federal Income Tax. If/when I hear that everybody is starting to pay into the IRS at at more even rate across the board, I will consider jumping back into rat race of my Tech Sector. I am a huge advocate for abolishing the IRS and invoking a Fair Tax system. Everybody pays, everybody has skin in the game, so everybody will be motivated to be more efficient and scrutinize our politicians and their sending.

I understand the whole scheme behind a Progressive Tax system, with those earning more paying more, but our current structure is too lop-sided. Everybody, down to the guy working a McJob should pay something each year, even if only $100.

kaypella
kaypella

" But it would also appear that the private sector is helping to compound the bad luck of the long-term unemployed by not considering them for the jobs that are open. "

That comment reeks of ignorance of business practices. Every business is looking to fill their positions with the best talent available, and they don't have time to screen 100 people for every job. Thus, they apply some initial screening criteria BASED ON PRIOR EXPERIENCE. If "recently or currently holding a job" has historically been a good predictor of a quality hire, then they will use that as a filter criteria if necessary based on the number of applicants. If they only had 3-5 candidates apply they will open up the screening criteria further until they get the targeted number of applicants to ensure a good hire. While not all HR firms do this in an optimal fashion, to imply in general terms that much of the business world is foolish for not considering the long term unemployed is to not understand the underlying mechanics imo. While there are some foolish companies out there as the comment above implies, most companies know what they are doing regarding hiring.

JohnG911
JohnG911

I just can't believe this is true!  I see so many Obama operatives on TV gloating about our wonderful economic recovery under Obama's brilliant leadership. Obama has to be the smartest president EVER because he has so much spare time on his hands to play golf, play cards, play basket ball, vacation, and attend fund raisers. This must be a mistake!  


bdonovan1980
bdonovan1980

"And the solution to the employment crisis is only going to be solved by faster growth"



Or we could help out the demand side of the equation by slowing immigration from the insanely high 1.8 million a year to the more traditional 250K or less.



That would make a huge dent in the unemployment numbers as American's wouldn't have to compete with so many foreign imports.


candodan66
candodan66

There will be more long term unemployed with corporations and their greed. Minimum wage is not even close to any kind of viable solution.  At this point in the history of the US it will take great courage and fortitude to have a chance to pull out of our demise. The big wigs and their cronies have miscalculated the consequences of their deeds.

matthewgiarmo
matthewgiarmo

I cannot believe no one can grasp this.  Employers can afford to cherry pick and never prefer to hire someone out of work.  Employers hire from the ranks of people who already have jobs.  To make matters worse, they view with morbid suspicion anyone out of work more than 6 months.  For every job for which you submit an application, you can expect competition from no fewer than 200 -- most of which will be individuals who are working the same job for some other outfit. 

JohnMuir
JohnMuir

With unemployment benefits increased to 99 weeks during the height of the Recession, perhaps that is why employers are afraid of employees who have been out of work for 6 months or more...not because they are "less valuable than the continually employed" but because they are greater risks of employers having to shoulder long-term unemployment benefits?  Just a theory.

ScottCisney
ScottCisney

Well, um, it is easy to say that, and it is true you can "make a job" yourself.  But employment is a part of our identity. It defines who we are. I'm so and so and I'm an engineer in aerospace.  That's who we are.  If I became unemployed, which is likely to happen to me in December, I would have a very tough time finding a job.  I am a bit "disabled" at the moment, well for months now.  I have a fused ankle that isn't fusing, so I'm on crutches and in pain.  I couldn't work at any sort of "physical job".  I would have to work at a job like I have now, at a desk (as an engineer).  And I think I'm not alone in my situation.  There are many people in their 50s who are laid off and can't "roof" or "frame" or do physical jobs like they could in their 20s or 30s.  There are many people who have become depressed, clinically, due to long term unemployment.  They can NOT work, without getting some help first, but they probably lack insurance.  I know we want to think everybody can work and that everybody who is not is a lazy, worthless, welfare queen, but it may not be true in many cases.  The economy does have serious structural problems that have developed over decades of globalization efforts. We are a hollowed out post manufacturing society.  We don't have modern social safety nets set up like the rest of the industrialized world (we are alone in not having either a nationalized health care system or a single payer system--and all of this hurts our industries who have to pay for this against competition who don't have to pay for it).  The jobs that are being created are low paying jobs.  Let's face it, it would be very, very, hard for a professional person to have to say "Welcome to Walmart" after working his entire life in a professional environment as a valued employee.  Let's be honest, we can say that is what people should do, but I'd bet NONE OF US want to do it.  What do we need to do?  Well let's start by throwing out the tea baggers who have the "screw you, I've got mine" philosophy of life.  We are all connected.  Your well being is connected to mine, and vice versa.  In "spiritual terms", we are all fellow travelors working our way through incarnations in the physical universe, here on this planet, and we should care about each other much more than we do, and we would, if we could "remember".  Selfishness is not a trait that will help us progress, and it is seen in great abundance in our political culture now.  So job one: throw out the tea baggers in the 2014 elections.  Democrats are not perfect, but, well, you've seen what the tea baggers are all about.  Job two:  Incentivize the heck out of producing it here in America.  Job three:  Nasty word here will be used by some, fix the tax code to make it "progressive".  There is no reason I should have paid 25% in federal income taxes in 2010 and Mitt Romney paid 13.9%, or my 15% in 2011 when he paid 10%.  That has got to be fixed.  We all benefit when everyone shares a little more of the pie that is mostly going to a tiny fraction of people now.  Anyway, there is more that would need to be done, but in a space like this you have to reduce ideas to one-liners.  Most people can't concentrate longer than that let alone comprehend more than that (sigh!)....

rutnerh
rutnerh

Outsourcing of manufacturing jobs and increased productivity with fewer workers are permanent drivers of underemployment ..and more high paying tech jobs are irrreversibly lost daily from further cutbacks especially in the pharma industry seeking to reduce costs and maintain exorbitant profits and high executive pay. College degrees with huge tuition debts are a lifelong liability also dragging down our economy and community colleges or trade schools are now better choices for high paying service jobs like plumbers, electricians, carpenters,etc

richard.draucker
richard.draucker

There is no excuse for the low labor participation rate.  If you can't get a job, make a job. Compete against those who won't hire you. There is no law against self employment.  If you won't hire yourself, why should anyone else? 

There is no excuse for not getting past HR.  If your resume in any way more resembles reality than an Obama speech on the economy, you're doing it wrong.  Someone here commented about the HR staffer looking for someone with 15 years experience in social media.  I can think of several ways to massage my resume to meet that qualification.  The days of having a canned resume that gets mailed to countless HR depts is out.  Customize your resume to the criteria of each company. 

The government and corporate America are at war against the middle class, and they're winning.  You can recognize they are adversaries and fight back, or you can go down as just another minor statistic. 

Choose. 



DhFabian
DhFabian

I read that over 80% of middle class Americans support Bill Clinton's welfare "reform" policies. It clearly states within these policies -- as a core principle of welfare reform -- that "there is no excuse" for being unemployed beyond a very brief period of time. This generation determined that poverty is merely a "personal lifestyle choice" that must be treated quite harshly, to discourage others from it. Welfare (unemployment) only serves as a disincentive, they said, to getting up every morning to work hard to find a job. This is why strict time limits are put on any sort of aid still available. When the issue of grossly inadequate wages comes up, middle classers tell the poor to get a second job, or a third, and go back to school in their spare time.  Why are people now complaining about getting what they wanted?

larissa_j
larissa_j

There's also a dirty little secret or maybe not so much a secret about some forms of contract employment. You can't work for another contract company for up to 6 months after the end of a contract which ties you into your current company when your current contract "ends."   It's hard to branch out when you can't move to another contracting company.

Employers are unwilling to consider this limitation on employment and often penalize the job seeker. 

Also, if you've "gone back to school" and believe it will solve your employment problems? It won't.  Even if you return to school, HR managers will still get stuck on the time you went without work because HR managers do not live in the real world.

Bullsgt
Bullsgt

It used to be you could walk in to a business and apply. Not any more, with the "applicant tracking system" Most business have created a set of criteria that can't be matched. Businesses are not looking to hire even if they say they do. More with less is the name of this game. Have you heard of a "social media manager" with 15 years experience.??? There are more people out of work then you know!

Titanus
Titanus

I wonder if this is the beginning of the effects of extreme wealth concentration.  Too little money in the hands of those with jobs means less spending, so employers hire fewer people because of the resulting slower economy.  Fewer employed then drag down the economy further and the cycle spirals downwards.

KBOS
KBOS

@kaypella 

I agree with you to a large degree, but I can tell you from experience that there have been some employers who do discriminate against the LT unemployed.  I know some hiring managers who have told me they have been instructed from up above not to consider anyone with more than an 8 month gap on their resume.

Now, I will say this, and this may add to your point, is that some employers will look to see what someone who was laid off has done while they have been out of work.  When I was laid off in 2012, I started volunteering, and then subcontracting, for a non-profit organization that is in my industry (aviation).  I continue to do that today even though I did find eventual employment.  Many organizations want to see how a candidate responds in the face of crisis or a difficult situation and wants to see them take some initiative.  I think that definitely helped in my case.

JohnGuest
JohnGuest

@candodan66 Keep in mind that a higher minimum wage will increase unemployment. If a company can afford to hire 40 people at 15 dollars an hour, they can only afford to hire 30 people at 20 dollars an hour.

The typical reply is "Well, then, the companies should reduce their profits." But if a company does that, then they attract fewer shareholders. More investors choose other firms, who offer higher profits. The low-profit company can't finance new equipment or improve their business, and are rapidly outpaced.

They can't build up cash reserves, so when something goes wrong, they can't pay for it out of their savings (lower profit=lower savings account balance), and they have to borrow, which incurs interest costs, and places that company at a further disadvantage relative to its higher-profit competitors.

When replying to an article about high unemployment, perhaps advocating for a higher minimum wage isn't the best choice.

MadDruid
MadDruid

@Bullsgt The name of the game in business has ALWAYS been "more with less."  That's how you increase profits.  Sometimes you do need to hire more people in order to get more, but if you could get more without hiring more people, you would.  Just like in your house, you may be able to afford to pay someone $100 to clean your house once a month, but you do it yourself.

larissa_j
larissa_j

@Bullsgt  "Have you heard of a "social media manager" with 15 years experience"

It's crazy. People who have no business writing job descriptions are in charge of that very duty.  I see it with coding too.  

As for resumes,  they no longer actually read them but rather filter them through software looking for the best key word match and best phrases.  It's ridiculous.  Most developers have years of experience in several languages and could easily fit most roles because one language to rule them all (well not really more like one language to learn them all)  but companies must have an EXACT fit for their EXACT skills which will NEVER happen.  It's no wonder these idiot HR reps think they can't find anyone.

DhFabian
DhFabian

@Titanus No.  It's just the beginning of middle classers noticing it. This has been ongoing for years. To the extent that this can be put into a "nutshell": Since Reagan, trillions of dollars were redistributed upward, largely to corporations, always "vital to job creation."  This money continues to be used to create jobs outside of the US, shutting them down here. As the job market continued to shrink, mandatory workfare replacement labor was established, replacing other workers at a fraction of the wages. In short -- more workers for fewer jobs, with all the inevitable consequences.

richard.draucker
richard.draucker

@blueskycentral @richard.draucker  

I'm a self taught programmer, self-employed for the past 13 years, with a moderate 6 figure income, competing in a market where my only competition is from very large, deep pocketed, venture backed corporations.  Over the years I secured positions in companies of all sizes based on a custom resume (lies and deceit) and above average sales skills, but firmly believe that I never told my adversaries any lies or deceived them in any way greater than the lies and deceptions they told me. 


JohnHartley
JohnHartley

@larissa_j @Bullsgt Part of the issue is due to the recruiters having no experience in the field. They couldn't tell you the difference between C++ and Ruby.