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Even positive news about long-term unemployment is depressing. 3.4 millionAmericans have been out of work for more than 27 weeks, a million less than last year. (27 weeks is the widely used definition of long-term joblessness.) Despite its recent decline, there’s still more long-term unemployment in the U.S now than in any pre-recession period since data-keeping began in 1948.
Matt O’Brien finds that your chances becoming a member of the long-term unemployed are almost twice as bad today as after the dot com bust. “Long-term unemployment isn’t a story about lazy people choosing to live on the dole instead of getting a job”, says O’Brien. “It’s a story about people who want a job not being able to find one… It’s a story about macroeconomic bad luck”. The long-term unemployed are, on average, about as well educated as the shorter-term unemployed. (And the often-talked-about skills gap issomething of an urban myth across the board, according to Inc.’s Cait Murphy).
Paul Krugman thinks O’Brien refutes the idea “the long-term unemployed are workers with a problem”. In Krugman’s view, it’s not personal:
In 2000, with labor scarce, there probably was something wrong with many people who got laid off; in 2009, it was just a matter of being in the wrong place. So if unemployment was about personal characteristics, being unemployed should have mattered less for job search after the Great Recession than before. What we actually see, of course, is the opposite.
Krugman’s solution, not for the first time, is more stimulus. But he’s not, by his own admission, averse to repetition.
Justin Wolfers sees increasing evidence that the current jobs malaise is permanently scarring the U.S. economy. He concludes that the U.S. labor market is (maybe) not broken. The relationship between the unemployment rate and the job vacancy rate (the Beveridge curve in econo-speak) has historically been inversely correlated: when one rises, the other falls. After the financial crisis, however, both rose. Now, says Wolfers, unemployment is falling and job openings are staying flat, supporting the idea that the recovery will make make the damage done by the recession temporary.
The chance of almost any policy help is slim. Since the end of 2013, 1.3 millionAmerican have lost federal unemployment benefits. A retroactive reinstatement of those benefits has passed the Senate, but is going nowhere in the House. Even if it were politically possible, in the larger scheme of the underwhelming recovery, federal unemployment benefits are a small bore, if tangible, response. Diane Swonk, chief economist at Mesirow Financial, says the U.S. has a “wound that’s too gaping to be covered by a band-aid”. If passing unemployment benefits is unlikely, there’s almost no hope for a true economic bandage like broad stimulus. — Ben Walsh
On to today’s links: