Long-term joblessness in U.S. surges to record high

In worrisome trend, 44% of unemployed have been out of work for more than 6 months

April 12, 2010|By Don Lee | Tribune Newspapers

WASHINGTON — — Despite the optimism generated by recent job gains, one grim statistic casts a long shadow over the recovering economy - and over the future for more than 6 million American workers. In an astounding departure from past patterns, fully 44 percent of the nation's 15 million unemployed have been out of work for more than six months.

And the evidence suggests many of them may never completely rebuild the working lives they lost.

Never since the Great Depression has the U.S. labor market seen anything like it. The previous high in long-term unemployment was 26 percent in June 1983, just after the deep downturn of the early '80s. The 44 percent rate this year translates into more than 6.5 million people.

In fact, nearly two-thirds of these workers actually have been jobless for a year or longer, new Labor Department reports show.

"I'm particularly concerned about that statistic, because long spells of unemployment erode skills and lower the longer-term income and employment prospects of these workers," said Federal Reserve Chairman Ben S. Bernanke in an April 7 speech.

The hardships of workers are straining the nation's finances, too. In normal times, jobless workers can qualify for up to 26 weeks of state unemployment benefits. But the severe economic crisis in the last two years has prompted Washington to help fund jobless benefits for up to 99 weeks in high-unemployment states, including California and Florida.

Federal spending on unemployment benefits could reach $168 billion this year, five times the level in the years just before the recession, according to a report from Pew Charitable Trusts. In addition, tens of billions more are being spent for food assistance to unemployed workers and their families.

At the same time, government revenues have fallen as Social Security, payroll and other tax receipts have shriveled with fewer jobs and lower earnings. That's contributed to massive fiscal problems in many states. California already owes the federal government about $7 billion for unemployment benefit loans, and is getting deeper in the hole by the week.

"It's really killing the deficit," said David Card, an economics professor at the University of California, Berkeley, which has made cuts in faculty pay and course selections.

The rise in long-term unemployment - coupled with economists' projections of a slow jobs recovery - mean the toll to individual and government budgets is likely to persist for some time. Labor Department figures suggest there are 5.5 unemployed workers today for each job opening, compared with two job seekers for every opening in 2007.

The problem has another, less direct impact as well: Since many of the long-term unemployed are older workers, some will have little choice but to retire earlier than planned - which means more people drawing Social Security and Medicare, and fewer contributing to them through payroll taxes.

As in previous downturns, a large share of long-term unemployed are in manufacturing and construction.

But most of today's workers who have been jobless for 27 weeks or more are in sales, office and other service industry jobs, including more than 1 million in management and professional occupations.

Some economists doubt that workers in general, would lose skills after just six months or even a year or two out of work. But there's widespread agreement that - for whatever reasons - long periods of unemployment tend to make it tougher to get re-employed.

And even after getting hired, such workers are likely to experience a sharp and lasting hit to their incomes.

In one prominent study, Columbia University economist Till von Wachter examined the pay history of workers who lost their jobs during the early 1980s recession. Using Social Security earnings records, von Wachter and co-researchers found that these previously stable workers sustained a 20 percent drop in earnings after 10 years of losing their jobs, compared with other workers who weren't let go during that period.

For the laid-off group, the income losses didn't fade away completely even 20 years later.

Jim Sullivan, a Philadelphia area resident, had his best earnings ever in 2008. He made $140,000 as director of operations for a small landscape supply firm. But sales plunged in 2009, and in June he was one of a dozen employees laid off.

"I've sent out probably in excess of 3,000 resumes, and had a grand total of two telephone interviews," said the 52-year-old, whose longest bout of unemployment before was three weeks in the early 1980s soon after college.

Lately Sullivan has seen more postings on job boards and feels a little more optimistic about the future. But he's not counting on pulling down a six-figure income anytime soon.

"I'd be tickled to death to take 40 percent of that right now," he said. That works out to $56,000.

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