Economix: Average Length of Unemployment Rises Again

As we’ve noted before, the length of time the typical unemployed person has been out of work has been getting longer and longer. And in March, the duration of unemployment again rose, to an average of 39 weeks:

Source: Bureau of Labor Statistics

That’s the longest on record, even when you account for the fact that the Labor Department changed its methodology for calculating average unemployment duration at the start of this year. (The numbers produced by the department’s old methodology are shown in very light blue in the chart above; as you can see, they’re still higher than they were at any previous month on record.)

So what accounts for the interminable length of unemployment?

Layoffs during the Great Recession were unusually concentrated. Whereas in previous recessions a large swatch of American workers churned in and out of unemployment, this time around the ax fell on relatively few Americans. And as the economy has marched onward, this smaller group of workers has been left further and further behind.

Some of those people had been structurally displaced — that is, they were in occupations or industries that were disappearing more permanently, or they were less productive workers to begin with — and that’s why it’s so hard for them to get new work. But for many Americans, unemployment begets unemployment. The longer a person is out of work, the less likely he is to find new work in the coming few weeks, whether because of stigma, less intensive searching, skill deterioration or other factors.

So while American employers have picked up hiring, they are disproportionately hiring workers who have spent less time looking for a job. That leaves more of the long-term unemployed in the jobless pool — right now nearly half of those unemployed have been unemployed for at least six months — with each of those individual workers racking up even more weeks. The net effect is to pull up the overall average length of unemployment.

Here’s a chart showing the breakdown of unemployed workers, by how long they have been looking for work:

Source: Bureau of Labor Statistics, via Haver Analytics

One other potential explanation why people who have been unemployed a very long time have continued to stay unemployed is that jobless benefits last longer today than they had in the past. That may give an incentive for workers to keep actively hunting for jobs — a requirement for continued receipt of jobless benefits — whereas under different conditions they might have just given up, and therefore been no longer counted as unemployed.

Alan B. Krueger, a Princeton economics professor and former Treasury official (and former Economix contributor), has more on that argument in this column.

Article source: http://feeds.nytimes.com/click.phdo?i=88647d9e7202a5669c878e81933aec38