Economix: The Concentrated Pain of Job Loss

DAVID LEONHARDT

Thoughts on the economic scene.

I wanted to add one other explanation — to those Catherine Rampell cited, in her much-discussed Sunday article — for why unemployment has not become a larger political issue. Given how high unemployment is, there are surprisingly few people who have experienced unemployment in the last couple of years. This is the flip side of the historically high average length of the unemployment: joblessness is concentrated among a subset of the population, rather than affecting a larger group of people for shorter periods of time.

One set of numbers from the Bureau of Labor Statistics makes the case. In 1982, the unemployment rate averaged between 9 and 10 percent — and fully 22 percent of the labor force experienced unemployment at some point during the year. In 2009 (the most recent year of data), the unemployment rate also averaged between 9 and 10 percent, but only (or maybe “only”) 16.4 percent of the labor force experienced unemployment at some point during the year.

Just as surprising, the share of the labor force that experienced unemployment in 2009 was lower than in the early 1960s, when the unemployment rate was generally below 7 percent. Why? Among other things, temporary layoffs were more common in the past than today.

Source: Bureau of Labor Statistics

To be sure, the concentrated nature of unemployment may not be as important as the other big explanations cited in the Sunday article. But the difference is still striking: In 1982, the share of people who experienced unemployment was more than one-third larger than in 2009.

I discussed the phenomenon in more detail in two previous columns, including one in 2009:

Instead of doing lots of firing and some hiring, many companies have done only some firing and virtually no hiring, the statistics show. And that isn’t all bad.

Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.

If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.

The reasons for the slow churn are obviously complex. The baby boomers are moving out of the ages at which people typically start businesses. The economy has shifted away from sectors, like manufacturing, in which temporary layoffs are common. Educational gains have slowed, which affects innovation. And the federal government was not willing, at least until recently, to make the kind of investments that spurred entrepreneurship in the past — building the highway system, supporting scientific research, creating the Pentagon computer network that turned into the Internet.

But whatever the causes, the effects of the slow churn are clear: the pain of this recession has been concentrated.

Article source: http://feeds.nytimes.com/click.phdo?i=152c29313cdaf89f7033bc85207abfdf