How We Underestimate Long-Term Unemployment

May 8, 2013

During normal economic recoveries, the unemployment rate drops rapidly as employers begin hiring many of those individuals who lost their jobs during the recession. Recovery from the Great Recession has been atypical, with slower than hoped job creation. Unfortunately, the official long-term unemployment statistics underestimate the current problem, says Keith Hall of the Mercatus Center.

  • Millions of people are not considered unemployed by the Bureau of Labor Statistics, the government agency in charge of tracking labor statistics.
  • The main reason for the discrepancy between the actual number of those without jobs and the official number is slow economic growth in the recovery, which has created a difficult job market.
  • Currently, there are 4.6 million long-term unemployed in the United States.

To be counted as long-term unemployed, an individual needs to have had no work whatsoever for six months, be nearly instantly available if offered work and be actively looking for work. More than 66 percent of the 4.6 million long-term unemployed in the United States have been jobless for more than 1 year.

  • The problem with the official statistic is that it does not account for people who have dropped out of the labor force altogether after becoming discouraged by their job search.
  • Millions of people that were struggling to find work have stopped looking at all, and even if they browse the newspaper, they are not considered actively seeking work.
  • To be actively seeking work, an individual must send out a resume, interview for a job, engage an employment agency or engage in some other sort of activity that, by itself, could result in employment.

In 2007, the average unemployed person who dropped out of the labor force looked for a job for nine weeks; by 2011, that figure had risen to over 21 weeks. Because the economic recovery has been so slow, the millions of people who have dropped out of the labor market have lowered the unemployment rate while joblessness has gone up.

In a typical recovery, many of the long-term unemployed would have been rehired. Despite this, the labor market has actually outperformed gross domestic product growth. A more vibrant private market, not greater government spending, will catalyze continued employment growth.

Source: Keith Hall, "The Truth About Long-Term Unemployment," U.S. News & World Report, April 29, 2013.

 

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