Chart of the Day: The Escalating Long-Term Unemployment Problem

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By now, most people realize that the labor market's current problem isn't just unemployment -- it's long-term unemployment. As of June, 6.3 million Americans had been unemployed for at least 27 weeks. That number is up from just 1.1 million four years earlier. And this doesn't even include discouraged Americans who dropped out of the labor market. To make matters worse: the longer a person is unemployed, the harder it is to find work.

This point is clear from Bureau of Labor Statistics data compiled by Congress' Joint Economic Committee. Here's a chart the committee included in a new report (.pdf) on long-term unemployment:

unemployment duration flow 2011-06.png

The longer a person is unemployed, the lower the chances that they've found a job. Tragically, just 8.7% of Americans unemployed for at least 53 weeks got work. That's as alarming a statistic as I've seen about the current labor market turmoil.

According to the JEC's report, Americans who dropped out of the labor force in 2010 did so after 20 weeks of searching for a new job, on average. Prior to the recession, Americans typically spent 8.5 weeks searching for work before giving up. So interestingly, Americans are actually exercising more patience and determination than usual -- in a historically bad job market. This point helps to refute those who believe that many unemployed Americans just aren't looking hard enough for work. In fact, they're looking harder than usual before giving up.

But unfortunately, those job searches aren't ending well for the long-term unemployed, as the chart clearly shows. This begins to hint at the partially structural nature of the unemployment problem. Some industries have begun hiring again, while others will likely never make up as large a portion of the U.S. labor market as they did prior to the recession. For individuals who worked in sectors like construction, manufacturing, and housing, new skills must be developed to better coincide with the job openings that will become available in the years to come.

And long-term unemployment compounds its own problem. As people are jobless for longer and longer, their employment path gets worse and worse. Skills atrophy, life-time earnings expectations decline, and firms worry about their ability to get back to work after being out for so long.

Any attempts to fix the job market need to specifically address the long-term unemployment problem. The longer these Americans are out of work, the tougher it will be for them to ever get back on track.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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