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Forget the Unemployment Rate -- It's the Long-Term Jobless Who Should Worry Us

Amid the positive spin you're likely to hear about the latest unemployment figures, it's time for a serious debate about long-term unemployment. The picture is worsening, something that is bad for workers and bad for companies who will eventually want employees with up-to-date skills.

For the long-term unemployed, it might as well be a Great Depression that leaves them standing in soup lines. The picture is getting worse.

The Labor Department reported on Friday that the average duration of unemployment was 30.2 weeks in January; in April it was 33 weeks. The percentage of the unemployed who have been jobless for more than 27 weeks was 40.9 percent in January; in April it was 45.9 percent.

In the Great Recession it has proved a far, far worse problem than in previous downturns, as this chart suggests:

The negative effects of this trend abound (click the chart for a larger version):

  • The long-term unemployed have lower earnings over their lifetimes, eating into purchasing power overall. Retailers beware!
  • Pressure will build to extend unemployment benefits. Spending-averse politicians beware!
  • Longer joblessness means fewer contributions into the Social Security trust fund. Tax-averse politicians beware!
  • More people will lack health care for the long term. Reformers beware!
  • Sending out resumes does not keep skills current. Employers beware!
As Fed Chairman Ben Bernanke put it:
More than 40 percent of the unemployed have been out of work six months or longer, nearly double the share of a year ago. I am particularly concerned about that statistic, because long spells of unemployment erode skills and lower the longer-term income and employment prospects of these workers.
The public policy solutions to this problem are politically knotty.

Nobel Prize-winner Paul Krugman has been one of the few serious voices out there for additional government stimulus in the form of a construction program, an idea that is beyond dead in Washington right now. But it would pick up slack in the hard-hit building sector.

Employers can expect more and more job-seekers to walk through their doors attempting, some valiantly, some not, to overcome what is commonly called the "long-term unemployment bias" -- the tendency of employers to believe that their skills did nothing but degrade while out of work. Contract work, volunteering and other tactics help fight this impression.

But unless the political winds shift -- and markedly -- the problems of long-term unemployment will be with us for years.

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