The January jobs report was surprisingly strong, showing nearly a quarter million jobs added and the unemployment rate dropping to 8.3 percent. Of course, we need job growth this strong and stronger for years to get back to health in the labor market, (even at January's rate of job growth, it would still take us until 2019 to get back to full employment). But the January increase was a clear step in the right direction. That's the good news.
The bad news is that it is still incredibly hard to find a job in this economy, and that's not going to change anytime soon. As the figure below shows, the share of unemployed workers who have been unemployed for more than six months (the maximum length of regular unemployment insurance benefits in most states) is still at near-record levels and has seen virtually no improvement in the last two years. The share of the unemployed who have been out of work for more than half a year shot up from 17.5 percent in 2007 to a staggering 43.7 percent in March 2010 and has hovered around that point ever since. It peaked at 45.5 percent in March 2011 and currently sits at 42.9 percent. These record-high rates of long-term unemployment are not surprising given that there have been more than three unemployed workers for every job opening for more than three years straight (for more on this, look here).
Research on the unprecedented increase in unemployment duration in the Great Recession and its aftermath shows, unsurprisingly, that the key reason for the increase is the severe and persistent weakness in demand for workers (see, for example, this new piece by economists at the Federal Reserve Bank of San Francisco). In other words, it is not that millions of workers now lack the necessary skills, or have become unproductive, or would rather be on unemployment insurance benefits. (Extended unemployment insurance benefits in the Great Recession have been found to increase the duration of unemployment by an extremely small amount, but most of that can be attributed to unemployment insurance recipients being more likely to continue looking for work rather than dropping out of the labor force altogether. For further discussion on this, look here). The finding that the increase in unemployment duration is predominantly due to weak demand for workers means that it is not the unemployed workers' fault that they can't find jobs, employers simply do not have work for people to do.
Nevertheless, Congress is debating whether to renew or cut back on legislation that extends unemployment insurance benefits for the long-term unemployed for a maximum of 99 weeks. Given that the primary reason for the record highs in the time it takes to find a job is a lack of demand for workers, the truth is that while reducing unemployment insurance benefits might make workers more desperate to find work, it won't make them more likely to find work, since the jobs aren't there. Congress should reject suggestions to cut back on unemployment insurance benefits and instead renew the current program of extended benefits through the end of 2012.