24 Million Long-term Unemployed are M.I.A.

First, let's look at some numbers for a moment. They are just for last year — from December 2013 to December 2014.

1,688,000	less unemployed (the unemployment rate dropped)
1,092,000	less who were "long-term" unemployed
1,129,680	went on Social Security retirement or disability
3,116,000	net new jobs created
1,200,000	additional people "not in the labor force"
3,150,000	additional high school graduates

We'll be visiting those numbers again later in this post.

Currently nearly 3 million Americans —or about one-third of all of the jobless — have been out of work for over 6 months or longer. In past recessions, a far smaller share of the jobless had been out of work for so long.

In the last two years, seven states have reduced regular State benefits from 26 to 20 weeks (14 weeks in Florida and 15 weeks in North Carolina). During that time, federal extended benefits for the long-term unemployed were allowed to expire at the end of 2013. The unemployed will find little sympathy with a Republican legislator and/or Governor, even though the job market has not vastly improved since the Great Recession ended in June 2009 (despite what the mainstream media and the White House reports).

A Princeton University study last year (72-pages in PDF) showed that after 15 months, the long-term unemployed were more than twice as likely to have withdrawn from the labor force than the short-term unemployed. But if most of them weren't ever rehired, then where did they all go?

Some found jobs. Most didn't. Those over 62 may have taken Social Security retirements. And if someone had medical evidence of a disability (and was lucky enough to have had an empathetic judge), they may have went on disability.

Alana Semuels wrote a nice article at the Atlantic titled: "A Better Way to Help the Long-Term Unemployed" (February 2015). But I paused at this statement: "Many of the long-term unemployed apply for disability insurance once they run out of benefits, and once they get on the disability rolls, they’re unlikely to work again."

Please allow me to clarify a few things:

1) Many people apply for disability, regardless if they run out of unemployment benefits, as disability "claims" always increase during a tight job market (like during recessions) — because even many people with disabilities would also prefer to work.

2) Despite the number of "applications" for disability, actual "awards" have gone way down — and only about a 1/3 of all claims are ultimately approved (but many times, even then, it can take up to 3 years after several appeals.)

3) If they are unlikely to work again, it is for several factors, and not just by choice. Lack of actually physically working can make someone's disabilities more acute — just as with someone's skills, their bodies can also atrophy. And with secular stagnation, even the youngest and most healthy people are being shut out of the job market (Here's a wonkish paper about secular stagnation by Larry Summers).

4) Also, the long-term unemployed and older workers (and those who are disabled) are many times discriminated against for hiring. At the Center for Economic and Policy Research, Dean Baker comments: "Since older workers can now get insurance through the exchanges [via Obamacare], employers will be less concerned about picking up an older worker's health care costs. It will be interesting to see if this has a positive effect on their reemployment prospects."

29,316,000 Americans (16 and older in the civilian noninstitutional population) reported a disability last month (February 2015). At that time, less than a third (8,940,599 or 30.5%) were disabled workers in payment status for Social Security disability benefits. And almost 6 million were working.

Because terminations for disability benefits cancel out "awards" in any given year, and because only 1/3 of claims were awarded last year, there was only a net gain of 11,934 workers in payment status for disability benefits in 2014 — and that's out of  over 2.5 million claims (deaths and conversions to regular Social Security retirement benefits account for most of the terminations that occur.)

Year	Applications	Awards	Terminations	Approved	Net Gain
2014	2,521,459	810,973	793,646	32.16%	17,327*

* Of which 11,934 were "disabled workers" (The remainder were widowers, children, etc.)  Source: SSA

But where did everybody else go? Others retired, and many, early. Early on into the recession in January 2008, the first baby boomers retired at the age of 62 with reduced benefits — many because, after being laid off, were forced to retire early after being denied employment —  then they were locked into poverty for life.

According to a new report by AARP, older workers who lose their jobs spend longer periods out of work, and if they do find other jobs, they tend to pay less than the ones they left ... Although overall unemployment is lower among workers over 55 (because they're working longer), the situation is reversed when it comes to long-term unemployment. (The Washington Post has a recent article covering AARP's latest survey).

Last year (2014) there were an additional 1,117,746 retired workers who went on Social Security. Now add 11,934 disabled workers who were also added in payment status to the Social Security disability roll for that year, and we have a total of 1,129,680 who left the labor force last year to go on Social Security.

That same year, for all of 2014, there were 3,116,000 jobs created (how many were temp jobs?) And the number of people counted as unemployed went from 10,376,000 in December 2013 (when federal extended unemployment benefits ended) to 8,688,000 in December 2014 — for a difference of 1,688,000 less unemployed for the year 2014.

Of those, there were 3,877,000 long-term unemployed as of December 2013, which went down to 2,785,000 by December 2014 — for a difference of 1,092,000 less who were long-term unemployed for the year 2014.

According to a study by the NBER (National Bureau of Economic Research), Congress failing to reauthorized the extension of unemployment insurance at the end of 2013 (for the long-term unemployed) resulted in 1.8 million additional people getting jobs. On really? But only 1.3 million were receiving these benefits when the program expired, so how can that be?

24 Million Unemployed M.I.A. — From July 2008 to December 2013, we had a whopping 24 million long-term unemployed workers who once qualified for these federal jobless benefits. How many "net new jobs" were created during this time? Maybe some people qualified for extended benefits 2 or 3 times during this period. But where did the rest all go if they didn't retiree or go on disability or get rehired for a lower-paying job? 

As of March 2015, the number of people getting State unemployment benefit rates reach historic lows. Most short-term unemployed workers do not get state unemployment benefits. By December 2014, only 23.1% of the unemployed receive regular State jobless benefits (and no "long-term" unemployed were receiving any jobless benefits).

The class of 2014 had about 3,150,000 high school graduates. To keep it simple, for every college grad, we just assume one high school grad or dropout — and some of these people may have been attempting to enter the labor market for the very first time.

Remember, by the end of 2014 we had 1,688,000 less unemployed for the year — and 1,092,000 less who were long-term unemployed.

But where did everybody else go? During the recession and it's aftermath, 24 million were once long-term unemployed. Those that didn't die, or were not incarcerated in prison, or were not housed in a medical facility, are most likely still long-term unemployed — but they are now no longer considered a part of the labor force (they are neither "employed" nor considered "unemployed") — and most never received unemployment benefits — and if they can't find reemployment, many might only hope they turn 62 to qualify for early Social Security benefits.

In December 2013 we had 91,698,000 not in the labor force. By December 2014 we had 92,898,000 — for an additional 1,200,000 just for that year alone (We had over 11 million since the recession ended in June 2009).

Let's look at those numbers again (from December 2013 to December 2014)

1,688,000	less unemployed (the unemployment rate dropped)
1,092,000	less who were "long-term" unemployed
1,129,680	went on Social Security retirement or disability
3,116,000	net new jobs created
1,200,000	additional people "not in the labor force"
3,150,000	additional high school graduates

Note: Most of the drop in the number of unemployed from last year was attributed to the long-term unemployed!!! But how can that be??? Was it mostly the long-term unemployed who were being hired last year for all those new-fangled part-time low-paying non-union temp jobs without benefits? I doubt it. Were they older workers? I doubt it. Were they high school dropouts? Maybe. Were they recent college grads who were first entering the labor market? Possibly.

That Princeton study also shows that:

• Even after finding another job, the long-term unemployed are frequently jobless again soon after they gain reemployment: only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.
• The unemployed who have been out of work for more than 6 months still exceeds its previous peak reached in 1981-82, even though measures of short-term unemployment are close to their average rates. As a result, overall unemployment remains elevated because of the large number of people who have been unemployed long term.
• The long-term unemployed have problems finding work wherever they are, even in states with the lowest unemployment. The largest proportion of the long-term unemployed is over age 50 and is unmarried. 
• The long-term unemployed have a 20 to 40 percent lower probability of being employed 1 to 2 years in the future than do the short-term unemployed — and the longer workers are unemployed, the less attached they become to the labor market.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed from the month before at 2.7 million in February (2015). These individuals accounted for 31.1 percent of the unemployed. Over the past 12 months, the number of long-term unemployed is down by 1.1 million. But how can that be? (BLS: Historical data base and historical tables)

We once had over 15 million working-age Americans who were unemployed at one time at the peak of the Great Recession in the Fall of 2009 (see the table further below); and we had 24 million long-term unemployed since July 2008. So where did they all go since then?

Answer: Most are still out there, and probably still unemployed. Many (if not most) of the new jobs created during the "recovery" may have went to newbies in the labor force (or just regurgitated among temp workers):

BLS JOLTS: "Over the 12 months ending in January 2015, hires totaled 59.1 million and separations totaled 56.0 million, yielding a net employment gain of 3.1 million. These figures include workers who may have been hired and separated more than once during the year."

And I also suspect, many of those jobs are also going to H-1B workers — but mostly, they're probably going to over-qualified college grads, doing the jobs that high school grads used to do.

All tables: Click image below to enlarge

In his paper Larry Summers says: "I continue to urge that it is worth taking seriously the possibility that we face a chronic problem of an excess of desired saving relative to investment. If this is the case, monetary policy will not be able to normalize, there will be a continuing need for expanded public and private investment, and there will be a need for global coordination to assure an adequate level of demand and its appropriate distribution."

My interpretation: "Those at the are top hoarding cash; the money supply isn't being recirculated to drive economic activity. To expand public and private investment would require changing the tax code and having better enforcement by the IRS (offshore accounts, etc.) An adequate level of demand and its appropriate distribution can be acquired by raising the federal minimum wage to $25 an hour. (All the things that the current congress is against.).