Long-Term Unemployment and the “Recovery”

Long-Term Unemployment and the “Recovery”

Almost four years into the “recovery,” the employment picture is still grim. It’s not just the unemployment rate’s agonizingly slow descent. We still face persistently high rates of underemployment (including those who would like to work but have given up looking, and those working part-time because they cannot find full-time work). And there is little sign of recovery from an unprecedented collapse in labor-force participation, as many bail out of the workforce entirely.

But perhaps the starkest trend is the spike in long-term unemployment. Prolonged joblessness has always risen during recessions, but has never shot up the way it did after 2007 or stuck around so long into the “recovery.” The mean (average) duration of unemployment (see graphic below) jumped to over forty weeks in December of 2011—nearly double its previous peak of twenty-one weeks in late 1982—and still sits at nearly thirty-seven weeks. The median duration (half of the jobless spend less time unemployed, half spend more) rose as high as twenty-five weeks—more than double its previous (1982) peak. Indeed, because these rates have been so high for so long, the Bureau of Labor Statistics and the Census Bureau had to update their surveys in 2010 to allow respondents to report unemployment durations of up to five years (the previous upper bound was two years).

While there is no official definition of long-term unemployment, the commonly-used threshold is six months or twenty-seven weeks. As of February, about 40 percent of the jobless fit this description, a share that has not budged in a year. This is also the point (twenty-six weeks) at which unemployment insurance coverage would lapse in most states. Federal extensions push this out to between forty and seventy weeks (depending on state law and state unemployment rates), but workers are still exhausting their benefits (the red line on the graph) at starkly higher rates than ever before.

The cruel punch line here is that some states (most recently North Carolina) are meeting unprecedented need by slashing benefits. And because of the way in which the costs of unemployment insurance are shared, state action pares access to both state and federal benefits. Consider Georgia, which has chopped its eligibility for state benefits from twenty-six to eighteen weeks. This, in turn, reduces the number of weeks of extended (federal) benefits available to the state’s unemployed, for a net loss of nineteen weeks of eligibility. At Georgia’s average weekly benefit (about $275), the net loss in 2013 to each unemployed worker is over $5,000.

And then, of course, the sequester kicks in. While state unemployment insurance funds are not affected by the across-the-board budget cuts, federal benefits will take a big hit. And because the 5 percent fiscal year cut has to be absorbed in just six or seven months (the fiscal year ends in October), the reduction in federal benefits is likely be on the order of 10 or 12 percent.

All of this promises to do lasting damage. The burden of long-term unemployment, as John Schmitt and Janelle Jones have shown, falls disproportionately on those already disadvantaged in the labor market—African Americans, Latinos, less-educated workers, and young workers. Long stretches of joblessness bring with them not only economic insecurity but (as Dean Baker and the Pew Fiscal Analysis Initiative underscore) stark personal and social costs—including real barriers to re-entering the workforce, physical and psychological costs to workers and their families, and general productivity losses.

Colin Gordon is a professor of history at the University of Iowa.