Friday’s jobs report reveals that the biggest problem in the U.S. labor market is long-term unemployment, specifically the huge number of people who have been out of work for over 26 weeks.
The household survey published by the Bureau of Labor Statistics Friday showed that there are 2.2 million such long-term jobless workers, a number that hasn’t budged since last summer.
The long-term jobless make up 27.7 percent of the total number of unemployed people, an historically high share. The problem has been significantly alleviated from the depths of the recession, when the long-term unemployed made up as much as 45 percent of the total jobless, during 2010 and 2011.
Meanwhile, for those who have only recently been laid off or quit, the job market appears to be as healthy as it has been in half a century.
The short-term unemployment rate, which is the rate for people who have been looking for work for 15 weeks or less, stood at 2.85 percent in February. That matched the rate it hit last August, which was the lowest it has been since July of 1952.
The fact that the long-term unemployed are such a big part of the problem matters for federal policy.
The Federal Reserve has debated whether the fact that short-term unemployment is so low means that they cannot risk holding interest rates low for longer without sending inflation above their 2 percent target. In November, researchers at the Fed’s Board of Governors downplayed that possibility, a view that appears to have held up so far in 2016 as inflation has remained tame even as overall unemployment has dipped below 5 percent.
Other researchers at the Fed have found evidence that long-term joblessness will actually stay high even as the economy heats up because of a quirk in the way official unemployment is measured. When people want jobs but can’t find them, they are counted among the unemployed, and the Census Bureau takes note of how long they’ve been on the job hunt. When jobs are so scarce that people who want jobs simply give up on the search, however, they’re not counted as unemployed, instead, they’re simply counted as out of the labor force.
As businesses recover and job posts open up, however, some of those people resume the job hunt. As they do, they might tell the Census that they’ve been looking for work for a very long time, even though they were previously counted as outside the labor force. As a result, they are leap directly from out of the labor force into the ranks of the long-term unemployed, from the government’s point of view.
The end result is that disproportionately high long-term joblessness can be expected even as job openings head back to normal.
