Not all unemployment is created equal—there are better and worse ways to be without a job. The worst way is to be jobless for a long time. As a raft of economic studies have shown, the longer a person is unemployed, the harder it becomes for him ever to find work. In some cases, skills grow obsolete; in many others, companies are reluctant to hire those who haven’t worked in a long time, figuring they’re damaged goods. Unemployment is a setback; long-term unemployment is a sentence. There are 6.7 million Americans not officially counted as part of the labor force who say they’d like a job, according to the Bureau of Labor Statistics. Bringing these lost and largely invisible people back into the economy will be a long and expensive undertaking.
Today the overall unemployment rate is declining, but the number of long-term unemployed remains near historic highs: In late 2009 the percentage of the unemployed who’d been looking for a job for more than six months rose above 40 percent, a level the BLS hadn’t seen in the six decades it’s been tracking unemployment. The number has stayed above 40 percent since. The statistics are even more stark for those who’ve been out of work for more than 99 weeks—the point at which, in most states, unemployment benefits run out. In January 2009 there were 467,000 99ers. Last month the number was 1.8 million.
Those who’ve given up looking slip out of the labor force, into what is sometimes called “nonemployment.” Researchers know remarkably little about them: what they do to support themselves after their benefits run out, or how much they turn to other federal programs such as disability or dip into the underground economy.
This is partly because long-term unemployment has been rare in the U.S. In Western Europe, where wages are less flexible and it’s harder to fire people, employers are often more cautious about hiring. The more laissez-faire American economy, by contrast, tends to fire workers in large numbers during downturns, then recycles them back in when things turn around. Because of the weakness of the current recovery, that hasn’t happened.
Growth in the long-term unemployed is the most painful symptom of the economy’s funk. While few economists believe that we’ll end up with European levels of long-term unemployment, the fear is that, once the economy finally picks up, millions of able-bodied Americans will have been permanently cut off from the workforce and excluded from the recovery.
That would be a tragedy for them, and it would have broader implications as well. No one has calculated the exact price of all this lost labor, or the extra burden on such government programs as Medicaid, Medicare, food stamps, and welfare as they’re called on to support an entire subset of the population that has been branded as unemployable. Economists agree that the price is high. “There’s no doubt that the cost of the sustained unemployment and nonemployment since the last recession started is huge,” says Robert Valletta, an economist at the Federal Reserve Bank of San Francisco. It’s a cost all of us will continue to pay.
Sources: BLS, National Bureau of Economic Research