Thursday, November 21, 2013

Permanent Unemployment may be New Normal

According to a new Fed report, if one is jobless for 6 months or longer, they might only have a 10% chance of ever finding another job. And to make matters worse, federal extended unemployment benefits for those jobless longer 6 months will soon end.

Regarding what the unemployment rate is consistent with full employment, Joe Binden's former economic advisor says,

"Most economists place the [unemployment] rate in the range of 5 to 5.5 percent, though some estimates go as high as 6 percent. The Congressional Budget Office‘s latest projections have it at 5.5 percent....We think we can do better. Our work suggests that 4 percent — the average unemployment rate for 2000, the last time we were at full employment — is a reasonable target, one worth shooting for."

But as we all know, the "official" (or U-3) unemployment rate is currently at 7.3% — but we don't count millions of "discouraged workers" — and this jobless rate has been this high or higher for the past 5 years. PBS reports that, now in 2013, the U-7 rate is at an astounding 16.2%.

According to the World Bank, long-term unemployment with continuous periods of unemployment extending for one year or longer, expressed as a percentage of the total unemployed (using the U-3 rate) for the period between 2009-2013 in the U.S., the long-term unemployment rate averaged 31.3%. The U.S. Bureau of Labor Statistics defines long-term unemployment as being out of work for 27 weeks (more than six months).

In an article at the Urban Institute titled "27 Weeks and Counting" they write, "As of June 2013, a staggering 36.7% of the unemployed have been out of work for longer than six months." (Download the study, Who are the Long-Term Unemployed in PDF)

According to research last year by the National Bureau of Economic Research, the chance of being called for a job interview falls by 45% as unemployment lengthens from one to eight months.

According to recent research by the Federal Reserve Bank of San Francisco, by the time he or she has been out of work for six months, the chance for reemployment drops to 10%.

According to another report cited by economists Dean Baker and Kevin Hassett in an earlier (and excellent) New York Times article called The Human Disaster of Unemployment (which was also referred to at a congressional hearing last year for older workers) a worker between the ages 50 and 61, and who had been unemployed for 17 months or longer, only had about a 9% chance of ever finding a new job. And the longer they were unemployed, the lower their chances for ever finding work again. A U.S. Government Accountability Office study identified employer reluctance to hire older workers as a key challenge that older workers face in finding reemployment. The GAO also found that the number of workers age 55 and over experiencing long-term unemployment has grown substantially since the recession began.

Gregory Acs, director of the Urban Institute's Income and Benefits Policy Center, said "What could have been a temporary problem—where people laid off during a recession are rehired when the economy improves—is becoming a permanent problem."

And long-term unemployment appears very permanent. So it can be assumed that for someone older than 50, and who's been unemployed for 2 years or longer, their odds of ever landing another job again is most likely 0% --- and yet, those odds could get much worse (if that's even possible).

Just recently, at Bill Moyers' website: The Long-Term Unemployment Trap Could Get Worse

"Many experts are saying that further austerity would bring more bad news for the economy. Chad Stone, chief economist at the Center for Budget and Policy Priorities — a think tank focused on policies to help low- and moderate-income Americans — writes, the “mainstream explanation for why unemployment is so high is that businesses still don’t have enough sales to justify hiring enough workers to restore normal levels of employment.” Failing to renew the Emergency Unemployment Compensation (EUC) program, which has been extended a number of times since 2008 to help those struggling during the Great Recession, will have the opposite effect of what is needed — Americans out-of-work for long periods will have even less to spend, which will further blunt the already-pretty-blunt recovery."

Annie Lowrey, in an excellent article at the The New York Times, described long-term unemployment as a trap that becomes more and more difficult to escape with each passing month. Since the Great Recession started, long-term joblessness is up 213 percent, and economists are unclear about whether faster growth will improve the situation. She writes, "Some fear that it may already be too late to prevent long-term joblessness from permanently scarring the American work force and broader economy."

Apparently, the "new normal" is already permanent unemployment for many Americans (maybe for millions).

Researchers at VOX suggested that the use of a temporary work program can increase, not only employment entry, but also employment retention, and so may provide a means of addressing the low pay, no pay cycle. But it concludes that, while this has been shown to be effective in increasing employment overall (and employment retention in particular), there is little incentive for companies to support "back-to-work services" such as this.

Paul Krugman recently quipped about a post by Joe Biden's former economic advisor:

"Jared Bernstein puzzles over [Paul] Ryan’s supposed new drive to help the poor, and finds nothing at all there — just cuts in benefits for the poor and tax cuts for the rich."

That has always been the GOP's solution for creating jobs too (just like their solution for reforming healthcare) --- doing nothing --- at least the Democrats are trying.

Democrats on Capitol Hill have launched a drive to renew jobless benefits for people out of work for more than six months. Benefits for 1.3 million long-term unemployed people are set to expire just three days after Christmas. Lawmakers say another 1.9 million people would miss out on the benefits in the first six months of next year. "This is a human crisis for hundreds of thousands of people," said Rep. Sander Levin (D-Mich.).

As an aside: A new study has found that men who are unemployed for more than two years show signs of faster aging --- so don't worry, the rich are still living longer.

1 comment:

  1. UPDATE:

    A talking head on CNN just reported that the DOW JONES closed at over 16,000 today, marking the 40th record high this year. She accredited the upswing in the DOW for 2 reasons:

    1) reported positive corporate earnings
    2) an improved labor market (because unemployment claims were slightly down)

    What other misinformation will the media be reporting today?