Tag Archives: long-term unemployment

Early signals point to unemployment trouble

In January, I wrote a post that supported shortening the unemployment benefits for the long-term unemployed. I used data from North Carolina to show a 1.4% drop in the unemployment rate in just six months. Unfortunately, analytics website Five Thirty Eight published an article from their data lab today that tells a different story.

Since the end of the Emergency Unemployment Compensation program cut unemployment benefits for many Americans three months ago, those whose checks have stopped coming still aren’t finding jobs. In my own analysis of the North Carolina data, I noted that one potential red flag was the high percentage (3/4 of a percent) who dropped out of the workforce altogether. The unemployed who become discouraged and quit trying to find work cause the biggest flaw with the unemployment measure, causing a counter-cyclical movement against the unemployment rate. That drop-out red flag seems to be a larger driver of the overall rate than we’d hoped.

“The number is much smaller today not because the long-term unemployed, as these Americans are defined by the Labor Department, have found jobs, but because they have given up looking for work.”
-Ben Casselman, Five Thirty Eight

These data’s prognosis isn’t good. In essence, Five Thirty Eight’s data lab has found that after six months, your chances of finding a permanent job are close to “hopeless.” Those who are finding employment are accepting part-time or temporary work.

Casselman also has an interesting take on how policy will react in the coming years and in the next recession. While there have been mixed reviews about how to interpret the Fed’s unemployment target, it seems like it will continue to serve as an indicator to some extent. The Fed’s 6.5% threshold seemingly has been reached, and scaling back stimulation into the economy has already garnered speculation for the first interest rate increases in years. For those who have dropped out of the workforce or yet to find employment, the future looks bleak.

“The Fed has been pulling back on its efforts to stimulate the economy, despite continued high unemployment and low inflation, suggesting it thinks the long-term unemployed are gone for good.”
-Casselman

It’s hard to pinpoint how to manage the long-term employment situation in America. On one hand, it isn’t possible to continuing paying out benefits forever to millions without jobs. Yet, this three month data shows hints that it isn’t a lack of effort preventing Americans from the workforce. The chances of finding work quickly diminish after six months unemployed, so the first step is ramping up the efforts to get laid-off workers going right out of the gate. Additionally, hiring long-term unemployed to government jobs such as infrastructure projects or creating easier access to community volunteering opportunities can help prospective employees keep their resume fresh and full of work experiences.

Vote with your conscience or with your party?

With midterm elections coming up, 33 of the 100 senate seats along with all 435 seats in the house are up for grabs and many congressman are undoubtedly trying to vote along party lines to keep their constituents happy and ensure their chances of (re)election. While spending cuts and deficit reduction are on everyone’s mind, no one from either party wants to tackle entitlement reform. That said, certain entitlements need to be expanded during times of economic hardship, although not everyone would agree on this. While there are the automatic spending increases like unemployment benefits that act as a safety net so that the American people don’t have to wait for Congress to pass something so they can eat, sometimes more needs to be done.

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The above data from FRED shows that the initial claims for unemployment benefits. As you can see, the recession peak is leveling off with lower levels of newly jobless. While this would indicate that the economy is recovering, the long term unemployed are still struggling. The Senate and House are considering extending benefits for the long term unemployed now, although there is opposition from Republicans. While there are Republicans from states with high unemployment in support of the extension, the majority of Republicans are opposed to it.

John Boehner, the speaker of the House, said that his opposition to the bill stems from its lack of helping people get back to work and the fact that provisions to pay for the additional spending haven’t been figured out. While that may be true, it will take a long time for these people to get back to work, and waiting for other spending cuts to pay for the bill is stalling on an issue that needs attention now.

While I understand the need to limit spending, in the midst of a recovery certain things need to be taken care of. This issue should be nonpartisan and I think that the Republicans are making a mistake in opposing this bill. While they don’t want to rock the boat before their elections, I think that in this case proving that they can rise above political pressures to help the American people who are still struggling could only help them in the eyes of voters. Even Ben Bernanke has expressed concern over the issue while serving as Chairman of the Fed, which is supposed to be immune to political pressures. His message is clear regardless of party ideology: the Long Term Unemployed need help now.

 

Long-term unemployment a symptom of low growth

In her first meeting with congress as the charwomen of the FED, Janet Yellen made it clear that unemployment was a top priority.  Roughly 35% of the unemployed can be considered long term unemployed, which occurs when a person is jobless for 27 weeks or more.  This class type of unemployment is especially harmful, as research shows that the long term unemployed have a much harder time finding a job.  Being jobless for so long also takes a psychological toll on the individual and their families.  The FED made it clear that it will use more then the unemployment rate as a guide for its policies going forward, and turning the long termed unemployed into new hires should be their top of the considerations.

There are many economists that think the United States is experiencing an increased level of structural employment.  There is a great deal of evidence (like here and here) that this is not the case.  Before a solution can be found, we need to examine the problem of long-term unemployment.  The chief culprit can be found to be slow growth.  If a worker gets laid off and the economy doesn’t bounce back fast enough, taken with employers being tentative about hiring anyone due to uncertainty, a worker could very well be unemployed for 27 weeks or more.  Once someone has been unemployed that long, there is a stigma that works against them getting hired.  And while businesses say they are not hiring because applicants lack the proper skills, there is a lot of evidence that there is no skills gap.  While the picture looks bleak, the good news is that the unemployment is not structural, and the workers have the needed skills. What remains to be seen is what will be done to create the desperately needed growth.

In her remarks earlier this week, the chairwomen targeted unemployment as the sign that our recovery has a long way to go.  Even though she continues to follow the path laid out by the previous chairmen of less quantitative easing, She demonstrated in her first address to congress her ability to utilize the public forum as a way to pass information and reduce the uncertainty businesses face.  However since she is committed to the reduction in QE, and interest rates are already effectively zero (and will be for the foreseeable future), that may be all she is comfortable doing.  Because of this, the unemployment problem will most likely continue to linger until eventually the slow growth rate creates enough demand for labor.  Unfortunately, for many of those without a job or underemployed, the damage may already be done.

(Revised) Effects of Long Term Unemployment on Children

One topic that I don’t think is discussed nearly often enough is the effect that long-term unemployment has on the children whose parents are unemployed. Of course, unemployment is a terrible thing to go through for the parent who is actually out of work, but the negative effects that the child may be more likely to endure are frightening. Considering that there are currently about 2.3 million children in the United States that live with at least one parent who has been unemployed long-term (that is, for at least six months), this needs to be a bigger point of emphasis. Especially because this number has tripled since the beginning of the Great Recession in 2007 (Mitchell, Some 2.3 Million Kids Live With Long-Term Unemployed Parent).

There are many unfortunate potential damages correlated with and suffered by the 2.3 million children who have parents struggling with long-term unemployment, and it is not fair to these children who are put in this ill-fated situation. First of all, “unemployment among parents ‘can hurt children’s school performance, as observed in lower math scores, poorer school attendance, and higher risk of grade repetition,'” (Mitchell, Some 2.3 Million Kids Live With Long-Term Unemployed Parent). Even before looking at more of the adverse effects these children are faced with, the fact that their education is put into jeopardy is alarming enough. When you start to consider even more severe possibilities correlated with a parent’s long-term unemployment such as child poverty, homelessness, and child abuse, this topic becomes that much more concerning. Children can always be looked at as the future, as they will one day be the generation that runs the country and takes on the most important jobs we have to offer. Taking a look at child poverty, “children forced into poverty by a recession are three times more likely to be poor as adults than their more affluent peers. In short, the conditions of today will give rise to the next generation of poor Americans” (Lovell and Isaacs, Families of the Recession), and this doesn’t even take into consideration the conditions that these children will be living in while they are still children. It’s extremely hard to think about this without wanting to do something in order to try to change it.

Along this train of thought, some sort of bill needs to be passed by Congress in order to put as many of these parents as possible back to work and to improve and support the lives of their children (Lovell and Isaacs, Families of the Recession). As is suggested in the paper by Lovell and Isaacs, this could include a large education fund for the children, a large sum of money to go towards the Workforce Investment Act to stifle unemployment among the youth of our country, as well as a sum of money to prevent (or at least decrease) homelessness. Clearly these policies would be fairly expensive, but some of it could potentially be made up from cutting spending in other areas within the government that may not be so crucial at this point in time. It is obvious that we cannot put the youth of our country in an even larger hole than has already been created, and we really need to give them a chance to succeed in the future. What is currently happening to the youth in the United States is not fair to them and will not lead to success for them or the US in the future.

Effects of Long Term Unemployment on Children

One topic that I don’t think is discussed nearly often enough is the effect that long-term unemployment has on the children whose parents are unemployed. Of course, unemployment is a terrible thing to go through for the parent who is actually out of work, but the negative effects that the child may be more likely to endure are frightening. Considering that there are currently about 2.3 million children in the United States that live with at least one parent who has been unemployed long-term (that is, for at least six months), this needs to be a bigger point of emphasis. Especially because this number has tripled since the beginning of the Great Recession in 2007 (http://blogs.wsj.com/economics/2014/01/14/some-2-3-million-kids-live-with-long-term-unemployed-parent/).

There are many unfortunate consequences suffered by the 2.3 million children who have parents struggling with long-term unemployment, and it is not fair to these children who are put in this ill-fated situation. First of all, “unemployment among parents ‘can hurt children’s school performance, as observed in lower math scores, poorer school attendance, and higher risk of grade repetition,'” (Mitchell, Some 2.3 Million Kids Live With Long-Term Unemployed Parent). Even before looking at more of the adverse effects these children are faced with, the fact that their education is put into jeopardy is alarming enough. When you start to consider even more severe possibilities brought on by a parent’s long-term unemployment such as child poverty, homelessness, and child abuse, this topic becomes that much more concerning. Children can always be looked at as the future, as they will one day be the generation that runs the country and takes on the most important jobs we have to offer. Taking a look at child poverty, “children forced into poverty by a recession are three times more likely to be poor as adults than their more affluent peers. In short, the conditions of today will give rise to the next generation of poor Americans” (http://www.brookings.edu/~/media/research/files/papers/2010/1/14%20families%20recession%20isaacs/0114_families_recession_isaacs.pdf), and this doesn’t even take into consideration the conditions that these children will be living in while they are still children. It’s extremely hard to think about this without wanting to do something in order to try to change it.

Along this train of thought, some sort of bill needs to be passed by Congress in order to put as many of these parents as possible back to work and to improve and support the lives of their children (Lovell and Isaacs, Families of the Recession). As is suggested in the paper by Lovell and Isaacs, this could include a large education fund for the children, a large sum of money to go towards the Workforce Investment Act to stifle unemployment among the youth of our country, as well as a sum of money to prevent (or at least decrease) homelessness. It is obvious that we cannot put the youth of our country in an even larger hole than has already been created, and we really need to give them a chance to succeed in the future. What is currently happening to the youth in the United States is not fair to them and will not lead to success for them or the US in the future.