A Better Economy May Not Fix The Jobless Problem

For some, the labor market is worse now than in 2009.

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The unemployment rate has fallen from a Great Recession high of 10 percent in October 2009 to 8.3 percent, according to the latest jobs report from the Labor Department.

But make no mistake: in two key ways, the labor market has gotten worse.

The average length of unemployment is remarkably high, at 38.8 weeks, and it has been stuck near or above 40 for over a year. Compare that to the healthier year of 2006, when it mostly hung around the 17-week mark. Even when unemployment was at 10 percent, the average time that Americans were spending out of work was 27.6 weeks.

"The crucial thing about this recession is that the unemployment is remarkably long-duration compared to any previous recession, even the one that was just as deep, the 1981-82 recession," says Daniel Hamermesh, professor of economics at the University of Texas-Austin. "That means it's concentrated on fewer people. ... That's a crucial difference in this recession."

[U.S. Unemployment Applications Rise to 365,000]

Indeed, the unemployment rate soared as high as 10.8 percent in late 1982, but the average length of that unemployment then never went above 21.2 weeks.

That's one scary aspect of the jobs situation, but it gets worse: a quick look at the figures shows that that average is running away from the median, which is at 16.7 weeks.

A quick refresher: the median is the middle value in a given set—the median of 5, 6, and 8 is 6, for example. Likewise, the median for 5, 6, and 100 is 6, though the average of that set is much higher.

Why does it matter? It could mean that even while the jobless rate and the median length of unemployment hold steady, the unemployment problem is growing more stubborn by the day. If the average is growing while the median holds steady, it means there are people at the upper end of the spectrum, who have been out of work for a very long time, pulling that average higher.

"I'd rather have 10 people unemployed for 10 weeks, let's say, than one person unemployed for 100 weeks," says Hamermesh.

The amount—and type—of effort it will take to get all 10 people in either group back onto the job will likely differ very much, he says.

Workers who have been out of work for two years, for example, may find that their skills have deteriorated and may have to learn new skills. A worker only out for a few weeks, meanwhile, more likely has skills that are still in demand.

"It has tremendous implications for how you spend money on training [and] re-education," says Hamermesh.

So simply trying to boost demand via a fiscal stimulus program or tax cuts, for example, may not be enough to bring the job market back, if people out of work need new skills.

Then again, data on the effectiveness of job retraining programs is inconclusive, as the Wall Street Journal recently reported. Workers who complete some programs are not tracked, and data on those who are tracked show that a depressed economy still can make a job search more difficult.

The sad truth is that getting long-unemployed people back on the job is going to be a daunting task.

"I think employers just by definition are risk-averse. If somebody hasn't had a job for 18 months, say, that makes them at least a little more risky" as a hire, says Brad Sorensen, director of market and sector research at Charles Schwab. "Then I think on the other side that the longer you're out of work the more hopeless you become and the less aggressive they are to find new jobs and to upgrade skills."

That creates a vicious cycle that could be many months in the breaking. "I think it's a two-way street that unfortunately feeds on itself," says Sorensen.


CORRECTED ON 8/8/12: A chart on an earlier version of this story was incorrectly labeled. The vertical axis measures weeks, not days.