OBAMANOMICS: Report exposes bleak prospects for long-term unemployed

03/21/2014

WASHINGTON (AP) — A new report documents the bleak plight of Americans who have been unemployed for more than six months: Just 11 percent of them, on average, will ever regain steady, full-time work.

The findings by three Princeton University economists show the extent to which the long-term unemployed have been shunted to the sidelines since the Great Recession. The long-term jobless number is 3.8 million, or 37 percent of all unemployed Americans.

“The long-term unemployed are more than twice as likely” to stop looking for a job than to find one, according to the report co-written by Alan Krueger, formerly President Barack Obama’s chief economic adviser. “And when they exit the labor force, the long-term unemployed tend to say they no longer want a job.”

During any given month from 2008 to 2012, barely more than one in 10 of the long-term unemployed had found full-time work. Their troubles were similar in states with high as well as low unemployment rates.

The analysis shows that a better predictor of hiring comes from the short-term unemployed, who are far more likely to be rehired.

Across the country, levels of short-term unemployment have essentially returned to pre-recession averages, even though the overall national unemployment rate remains historically high at 6.7 percent. The report says that based on the number of short-term unemployed, further job gains could lead to “rising inflation and stronger real wage growth.”

That’s because the relative exclusion of the long-term unemployed means employers must choose from among a limited supply of workers. That trend could push up prices.

Federal Reserve Chairwoman Janet Yellen on Wednesday cited flat wages and low inflation running below the Fed’s 2 percent target as evidence that the Fed should continue to support the recovery by keeping interest rates extremely low.

The number of people unemployed for more than six months has tripled since the recession began at the end of 2007. It peaked at 6.77 million in early 2010.


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