Opinion

Felix Salmon

No good news for the long-term unemployed

By Felix Salmon
January 7, 2011

The December jobs report turns recent history on its head. We’ve been used to healthy increases in employment making no dent in the unemployment rate, but this time a mediocre jobs figure—just 103,000 new jobs were created—coincides with a gratifyingly large fall in unemployment, to 9.4% from 9.8%. For those keeping track at home, that’s employment up by 103,000 and unemployment down by a whopping 556,000.

There’s no doubt that the headline payrolls number is a disappointment. The economy just doesn’t seem to be creating jobs: we need to see 150,000 new jobs a month just to keep pace with population growth. But is there some good news, at least, on the unemployment front?

I’m not sure. While unemployment is down from both December 2009 and December 2010, it’s down only for those who have been out of work for less than 26 weeks. The ranks of the long-term unemployed are still rising:

unemployed.png

Meanwhile, the numbers of “discouraged” people continue to rise very fast indeed: these are the people who’d love a job but have given up looking for one and therefore don’t count as unemployed.

Among the marginally attached, there were 1.3 million discouraged workers in December, an increase of 389,000 from December 2009. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.

The headline unemployment rate is important, and it’s great that it’s coming down. But if you’ve been out of work a long time, there’s little hope in these figures for you.

Comments
19 comments so far | RSS Comments RSS

When viewing macro statistics, it is easy to lose sight of the underlying micro decisions.

The long-term unemployed are those who have been deemed unemployable by multiple HR people over half a year. There are many reasons why somebody might end up in this situation. Too old, salary expectations too high, experience limited to an industry that is in decline, and/or skills that are in an area of economic surplus.

We need a solution that addresses these specific concerns. The economic growth that you’ve been pushing is good for the young, good for those whose hours have been cut, and good for those who are recently unemployed, but it isn’t going to help those who need new skills to find a new position. Jobs are not fungible — and the jobs being created require different skills from the jobs that were eliminated in 2008-2009.

Posted by TFF | Report as abusive
 

TFF – no one is going to argue that there are structural components to unemployment (least of all Felix, I imagine, who’s written a post or two about that subject in the distant past).

But I think we’re often too quick to ascribe the 6.5 million long term unemploymed to purely structural factors. Especially in an economy where the job losses were spread with surprising consistency throughout almost every sector.

I would say let’s address the structural factors – but not until the NAIRU starts to indicate we’ve dealt with the cyclical side.

Posted by strawman | Report as abusive
 

Unfortunately, strawman, the structural factors take time to address. Unemployment was already spiking in early 2009 (and surely people saw that coming in October 2008), and what have we done? Stimulus and more stimulus, extension of unemployment benefits, but very little to address the structural imbalance that led to the collapse in the first place.

A friend of mine who lost his job very early on is now applying to a degree program to recertify in a new field (of course one that builds on his existing skills and strengths). Multiply this by a million, then wait a couple years, and we’ll have some progress.

Why must we wait a decade to address the structural factors? I agree that there are some cyclical elements also in play, but those may take a LONG time to play out. As Felix and others have noted, job growth remains BELOW what is presumed necessary to absorb population growth. High unemployment is going to be with us for a long time.

I don’t think we can afford to sit around and wait for somebody to hire us at our old job.

Posted by TFF | Report as abusive
 

I have no statistics on this, but I’m noticing a lot of the long term unemployed are previously second income generating mothers ( I know about 4) who have made the choice to become full time stay at home mothers rather than begin a job search. I don’t know any male breadwinners that are unemployed long term.

Posted by Texast | Report as abusive
 

Don’t recall if it was Felix that lead me down this dark and musty hole, but I ended up registering for research papers at the San Fran Fed, and in November they published

http://www.frbsf.org/publications/econom ics/letter/2010/el2010-34.html

which speaks to this very issue.

Posted by ARJTurgot2 | Report as abusive
 

Texast, I know a couple male breadwinners who have been replaced by female breadwinners in their household budget. But yes, I suspect there is an element of what you mention. Salaries for these job openings are often lower than those for the positions that were eliminated, so this can shift the “second income” decision. In many cases that employment was only marginally profitable before the recession (which suggests that the decline in household budgets might be less than the decline in GDP).

ARJ, that is an interesting paper but somewhat unconvincing on a couple grounds. First, I believe there was evidence of structural imbalance in the economy even BEFORE the recession. Those imbalances have been slowly growing for a long time, and while they might not have been reflected in the unemployment rate, they did show in the increasing disparity between the “haves” and the “have nots”. To borrow a phrase, “Why let a good crisis go to waste?” The best time to get serious about education and retraining is when a lot of people are out of work and have time on their hands.

Second, the measures being used (like most macro measures) are exceptionally blunt instruments. Noting that the chart looks roughly like what happened in the early 1980s does not prove any deeper connection between the two. And frankly, I don’t see any other similarities between economic conditions today and those in the early 1980s.

Posted by TFF | Report as abusive
 

Texst
Actually, I have read statistics and Males 37 and over have been hit the hardest with long term unemployment which I assume most are the number one breadwinners. The biggest category for women is 55 and over which most of them have children which are already grown.

Posted by dweebie69 | Report as abusive
 

What we are seeing with the long-term unemployed/ unemployable (LTU) statistics is the multi-generational result of the failure of our pathetic K-12 education system.

Millions of the LTU’s are there because they can’t write beyond first grade level, can’t do the math to balance their checkbooks, and absolutely can’t read for comprehension beyond that same first grade level.

How are we going to “re-train” these people into new careers? How can we teach them to read a blueprint when “see Dick and Jane run” is their reading level? Before they go to a school for machinists or IT programming they are going to have to go back to school at the K-12 level to learn what they missed in the crap education they got the first time.

Answer that question and you will have the answer to Long-Term Unemployment.

Posted by stanrich | Report as abusive
 

Stanrich, you answer your own question.

For some people, “education” doesn’t mean a college degree. It means completing 8th grade satisfactorily. We do have programs set up for this (it is essentially a GED program), but they could definitely use more funding and attention.

The second piece of the answer is to improve our K-12 programs so that we stop ADDING to the population of the marginally educated. There is no universal answer to that because schools serve very different populations. I will note, however, that private schools generally spend $12k-$30k per student. (The private schools that are prepared to deal with serious behavioral issues are among the most expensive.)

Expecting educational excellence for difficult populations on a budget is unrealistic. My own school does a pretty good job of that, but relies heavily on parental involvement and charitable or below-market service from at least half the faculty. Any attempt to scale our program would either water down the staffing (decreasing the effectiveness) or push the cost up well above what the public schools spend.

The final piece is that we don’t need to retrain high school dropouts to be rocket scientists. If all the unemployed (and they range the entire educational spectrum) take just one step forward in their training, then as a society we’ve made significant progress.

Posted by TFF | Report as abusive
 

Is it also possible there is a disconnect with unemployment insurance and retraining? Here in Canada, if you choose your own direction for training, you have to ensure there is a high degree of possility of getting a job in that sector and provide proof before you get any funds for retraining.

From what I read your unemployment insurance and retraining are also intertwined but perhaps not making the right decisions with or for the unemployed in training for the future. Or is it that they are less trainable and as TFF says, may just need their GED or some small advancement to be able to retrain? Is that not offered automatically with unemployment??

I sense that there is a lot of “throwing up of hands” or just blame Government not act on so many issues. Blogs are a wonderful way of keeping people abreast of the problems, but someone has to take action before you can see a reaction.

OK, this is tongue in cheek, and no disrespect meant… just hoping for a smile or 2.

5 top Jobs of the future:

* Career Planner
* Life coach and budget instruction
* Career Matching all CS, Tech and IT jobs (to India)
* Mortgage Fraud and Forensic Analyst
* Lawyer specializing in State property Law

Posted by hsvkitty | Report as abusive
 

hsvkitty, I’m not terribly familiar with the unemployment system here. Education (in all its forms) and retraining definitely OUGHT to be a significant part of the process, but I get the impression that the greater focus is on trying to immediately get a job that you are already qualified for. Perhaps somebody with greater relevant experience could chime in?

Would also love to see some employers put their money where their mouth is — develop and make available training programs for those jobs they are having trouble filling. Personally, I would be more interested in retraining under the direction of a potential employer than taking a degree/certification program without knowing ahead of time where it might lead. (I might eventually go that route anyways, but it is a little daunting to step away from the security of my present employment into the unknown.)

Government is largely useless. If you read a good idea on a blog, consider how you might implement it in your own business or community?

Posted by TFF | Report as abusive
 

Unemployment is not a social problem; it’s an individual problem. People who understand that statement are not unemployed.

I know, I know, that sounds heartless and any number of people will have a negative reaction to it. But that doesn’t mean the statement is wrong.

Lack of useful work to be done is not the issue. The world never had a shortage of useful work to be done, ever.

If you got fired or “released” or “let go” from a job you had, what does that mean? It means one of two things; either the job you had wasn’t capable of producing sufficient value to be worth paying for, or you weren’t producing sufficient value to have the job. Either way, it’s you, the unemployed, that must change to rectify the problem.

Posted by DLK | Report as abusive
 

Unemployment is due to the individual? I’ll have to forget about seasonal, frictional, structural, what-everal unemployment then, that and the actual causes of the current economic situation.

As for long-term unemployment – from a UK perspective its dead easy (1) do some mickey mouse supply-side constraint speeches and stats, then crank up the NAIRU to justify raising interest rates sooner rather than later and (2) implement punitive welfare reforms. Bit o’both and jobs a good ‘un.

Posted by zinkus | Report as abusive
 

DLK, a better statement would be, “The individual is the only one who has any hope of correcting his/her unemployment.”

Government actions to address unemployment are largely futile. (They can soften the blow with unemployment benefits, but that doesn’t fix the problem.) You can’t really have a recovery until businesses (often run by INDIVIDUALS) choose to hire, and they will begin by cherry-picking the pool of unemployed for those INDIVIDUALS who have the skills and profile that best fits their needs.

I do worry about age discrimination. Right now there are many unemployed in every age bracket, but I suspect those over 40 will have a harder time finding new jobs than those who are younger. This is part of the reason I would encourage older workers to consider starting their own businesses. Age and experience are considered a handicap for a prospective employee, but they are clearly assets for a business owner.

Posted by TFF | Report as abusive
 

If you have not already done so, Raghuram Rajan’s latest book “Fault Lines” does a pretty good job on this subject. I have a problem with some of his details, for example he avoids completely the abuse of the H1B visa process and the implications where well qualified workers are abundant, but it’s a worthwhile read on the inter-relations, especially beyond the U.S. border.

Posted by ARJTurgot2 | Report as abusive
 

There are too many specific opinions here. Lets get one thing straight, the ideology of winning the cold war was a ramrod to force market capitalism straight down everyone’s throat to prevent any type of socialism to rise at least on here in the USA. This was done by the Federal Reserve cheap money policy which basically overcooked every sector of the economy. As result we over price commodities and high unemployment. And of course an atmosphere of too big to fail. The prospects of higher employment and better standards of living will be offset by at least the increasing cost of getting to your job due to fuel cost. There is no rational end in sight to a realistic soft landing. Hard times are all upon us. And with numbers, misery will have lots of company.

Posted by soonshine | Report as abusive
 

Great post Felix,

I’m comming in a bit late to request follow up info but I would love to know what % of the Long-term unemployed are in the 57-66 age range.

I manage money for a handful of individuals in that age group who lost highish paying jobs for large companies and are using unemployment insurance as a bridge toward retirement or semi-retirement.

At 59.5 you can tap your 401k’s & IRA’s at 62 you can file for early SS benifits and at 62 and even after 62 every month you can hold out earns you a bit more for the rest of your life.

I do not belive the portion of the longterm unemployed who have little interest in taking undesirable jobs or even desirable jobs at undesriable compensation levels is larger than assumed. While not a majority by any means some fraction of the longterm unemployed are actually semi-retired. They are taking advantage of a benifit that they feel they have earned through years of paying taxes.

I have no idea what the actual % is but I would love to know.

Posted by y2kurtus | Report as abusive
 

y2kurtus, the unemployment rate for the 55-64 demographic is the lowest of any at 6.6%. I’ve read that they are more likely than younger workers to be among the long-term unemployed (perhaps partially for the reasons you suggest), but I suspect that others simply retire early.

Some numbers here:
http://www.bls.gov/web/empsit/cpseea13.p df

Posted by TFF | Report as abusive
 

I am 54 years old; I had a stellar Aerospace career, and lost my job due to a vengeful, miscreant, and unethical manager in 2008. I received UI benefits until 6-months ago, and started an MBA program, because my education and 30-years experience wasn’t enough. I hear you all about “If” and “When” the jobs come back, but I am afraid I’ve got some bad news, folks… We are in the vortex of the One World Order’s grand-plan. Call them the Illuminati, Shadow Government, Trilateral Commission, Council on Foreign Relation and yes, even the Bilderberg Group, as they are known by all of these. Just as ancient Babylon, Egypt, Rome, Greece, the Mayans, Aztecs, Incas, the Soviet Union, Hitler’s Nazi Germany, all of whom built empires to rule the world. Now the Americans via the Shadow Government under the guise of the Illuminati will be added to the list of factions that have tried to erect a One World Government via the “New World Order.” President Bush (41) used it in nearly all of his speeches. They are out to trash the US, Canada, and Mexico, although, I don’t know how Mexico could go much lower, but you must have heard of the North American Union, right? Perhaps the European Union, does that ring a bell? Soon there will be an African then an Asian Union, because it is easier to control a handful of “Unions” than a hundred different countries. Face it, there are no viable recovery plans, the only thing we can do is hunker-down and resist. Do your research, please store food and water, or plant a garden if you can with organic, not genetically-altered seeds because they will not reproduce. They are skewing all of the data to make us feel like there is the slightest amount of hope, then they will divert our attention to some false-flag fictitious emergency, whether it be faux-terrorism, or aliens attacking a city, watch, it will happen, and we will all give up our freedoms for a little temporary security just like Benjamin Franklin said we would, check it out, he said it.

“A people willing to trade their freedom for temporary security deserve neither and will lose both.”

Benjamin Franklin
BrainyQuote.com

And here is what he said about being ignorant…

“A nation of well informed men who have been taught to know and prize the rights which God has given them cannot be enslaved. It is in the region of ignorance that tyranny begins.”

“Benjamin FrankliN
Brainy Quote.com

Great men throughout recent history have warned us about this. Take President Eisenhower for instance when he warned in 1961 of the rise of the military industrial complex. How much more plain does it have to get?

The only person, institution, agency, or company that will help you is you! Wake up! Please don’t believe me, check out what Gerald Celente of Trends Research is saying about our future. Now, he’s Mr. Doom, but it is all fact-based.Lastly, I pray to God that I am so completely wrong about this. The problem is it is backed up by fact-based truth. Be a true patriot and resist. Our founding fathers told us that this is what real patriots do.Godspeed USA

Posted by Landerkhan | Report as abusive
 

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