Wednesday, April 1, 2015

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year (72-pages in PDF) showed that after 15 months, the long-term unemployed were more than twice as likely to have withdrawn from the labor force than the short-term unemployed.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

All tables

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.).


  1. ----------- UPDATE ---------------

    "10 Reasons Why The Unemployment Numbers Are A Massive Lie"

    Our politicians and the mainstream media are attempting to convince us that everything is just fine. But what they are telling us simply does not match the cold, hard reality on the streets.

    And since the talking heads on television are proclaiming that we are nearly at “full employment”, that just makes millions upon millions of Americans that can’t seem to find work no matter how hard they try feel even worse than they already do.

    If jobs are “easy to get”, then those that are chronically unemployment must have “something wrong” with them. That is the message that we are being given. If the mainstream media says that unemployment has gone way down, then anyone that is still unemployed must be really “lazy”, right?

    When you are unemployed for an extended period of time, it can really suck the life right out of you. It can be really tempting to believe that you are viewed as a failure by your family and friends. And for the government to lie to us like this just makes things even harder.

    If you are unemployed and can’t find a job right now, I want you to understand that you are caught in the midst of a long-term downward economic spiral which is going to get a lot worse.

    When the government tells you that we are in a “recovery”, they are lying to you. And when the government tells you that things are about to get a lot better, they are lying to you.

    ----------- UPDATE 2 ---------------

    Something Strange Is Going On With Nonfarm Payrolls

    ----------- RELATED POSTS ---------------

    Robert Reich: Why College Isn’t for Everyone (Sunday, March 22, 2015)

    When a Summer Job Could Pay the Tuition

  2. UPDATE April 3, 2015 for March

    Not in the labor force

    93,175,000 Mar (A new record high)
    92,898,000 Feb
    277,000 additional people not in the labor force


    Jobs created in March (2015) 126,000
    Unemployment rate unchanged at 5.5 percent
    Unemployed persons was little changed at 8.6 million
    Long-term unemployed was little changed at 2.6 million
    Labor force participation rate was little changed at 62.7 percent
    738,000 "discouraged workers"


  3. Those between the ages of 25 to 54 (the prime working years) make up the majority of those dropping out of the work force, so one cannot blame baby boomers, retirement, disability and college kids on the declining participation rate. The 25 to 54 age bracket labor participation rates have not been this low since the 1980s.

    Currently there are 6.3 million people not counted as "unemployed" who want a job and another 8.5 million currently counted as officially "unemployed" who also want a job -- which totals almost 15 million -- about the same number we had at the peak of unemployment in 2009.

    So all the net new jobs that were created since then may have only kept up with population growth, and none of the 8.7 million jobs lost during the Great Recession were never really "recovered" (as the media likes to put it). So we're still at square one.

  4. Last year, Dean Baker: "It is a safe bet that GDP will grow in the fourth quarter and will continue growing at a moderate pace in 2015."

    I'm tired of hearing about GDP (or stock market prices) if workers aren't sharing in the gains. GDP and the DOW primarily measure how well those at the top are doing. If GDP and the DOW remained stagnant (no gains or losses) would wages go down, would unemployment rise?

  5. Huffington Post (March 2015) -- How To Tell If Your Job Is Terrible

    "38 percent of the gains occurred in retail, food service and temp agencies. Much of the job growth since the Great Recession ended in 2009 has been concentrated in low-wage industries, a trend that seems likely to continue. The National Employment Law Project reported that five of the 10 occupations expected to see the most growth in the coming years pay less than $12 an hour."

    How To Tell If Your Job Is Terrible

    If you don't get holiday pay but you're forced to work holidays.
    If every day you think, "Oh god, I have to go there and do this again."
    If you're wearing a polyester uniform shirt.
    If you laugh at the notion that you can call the authorities when you're being mistreated.
    If you work in the sort of place where you know they don't bother with safety regulations.
    If you never know what hours you're actually supposed to work.
    If you can't budget because you never know how much your paycheck's going to be.
    If you have to ask for permission to relieve yourself.
    If family emergencies are not allowed to exist.
    If your boss tells you that you should be grateful that your customers think you're attractive enough to sexually harass you.
    If they notice when you're five minutes late.
    If having an opinion can get you fired.

  6. New York Times (April 2015) Hours worked were down slightly, so overall paychecks were left essentially flat ... government statisticians revised their previous estimates for January and February, subtracting 69,000 jobs from the earlier figures ... Friday’s disappointing figures, the weakest showing in two years, mean it will take longer for the economy to reach a level most analysts consider close to full employment ... The nation still faces a “jobs gap” of four million, the number of additional jobs needed to reach prerecession employment levels ... Long-term unemployment also remains a problem for older workers even as more seniors are hanging on to their jobs well into their 60s. A report issued by the AARP Policy Institute this week noted that last year, on average, 45 percent of job seekers aged 55 and older were out of work for 27 weeks or more. The number of long-term unemployed was little changed at 2.6 million in March."

  7. The Washington Post: "It was pretty bad news all around. It wasn't just that the economy added 126,000 jobs in March when we'd been expecting 245,000. It was also that we lost 69,000 jobs in revisions to previous months. These tend to mark turning points in the economy. So the depressing message is that things weren't as good as we thought they were. Now, despite all this, the unemployment rate was unchanged at 5.5 percent, but, again, this wasn't cheery news. It was because the labor force shrank by 96,000. The total number of hours people worked also fell."

    The New Yorker: "Employment growth fell sharply in March, gaining a hundred and twenty-six thousand jobs, following a year in which the average growth was two hundred and sixty-nine thousand jobs per month ... A series of other economic indicators, such as retail sales and orders for durable goods, have also come in weak recently, indicating that the economy is stuttering. On Wall Street, some forecasters have reduced their estimates for first-quarter G.D.P. growth to 1.5 per cent, or even less ... According to [Larry] Summers’ “secular stagnation” hypothesis, the U.S. economy may be forced to hobble along with modest growth, at best ... Almost six years after the recession officially ended, the participation rate sits at 62.7 per cent, which ties the lowest rate since the late nineteen-seventies, when far fewer women went out to work. Although some of the decline is probably due to secular factors, particularly the aging of baby boomers, there is no doubt that slow economic growth and a perceived lack of job opportunities have also played a big part in the process. And at this stage, it seems, many of the discouraged workers have dropped out of the labor force for good ... Ever since the recession, business investment in plant and equipment has been worryingly feeble ... the rate of corporate investment has been so low that it hasn’t kept up with the expansion in employment ... Far from racing ahead to make up the ground that has been lost since the Great Recession, the United States is still being held back by slow growth in the labor force and in capital investment, which both reflects and reinforces the tendency toward mediocre economic outcomes."

  8. Pew: This year, Millennials will overtake Baby Boomers [So if the Boomers are retiring (and going on disability), shouldn't that make room for more prime-age workers in the labor force?]

    Paul Krugman: Power and Paychecks (read the reader comments)

    Atlanta Fed: What Seems to Be Holding Back Labor Productivity Growth, and Why It Matters (read the reader comments)

  9. Pew: This year, Millennials will overtake Baby Boomers

    * So if the Boomers are retiring (and/or going on disability), shouldn't that make room for more prime-age workers in the labor force? If so, why have we been hearing about the Boomers being the primary reason for the declining labor force, when the labor force has been in decline since it peaked in April 2000, but the first Baby Boomer didn't retire until 2008 (early, at the age of 62).