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For many, being jobless can seem never-ending

A record 44% of the nation's unemployed have been out of work at least six months. Many of those 6.5 million people may never completely rebuild their working lives.

April 15, 2010|By Don Lee
  • Economists worry that the long-term unemployed will lose their work skills or have a hard time finding another job. Above, people line up at a job fair Wednesday at the Rio hotel in Las Vegas.
Economists worry that the long-term unemployed will lose their work skills… (Ethan Miller / Getty Images )

Reporting from Washington — Despite optimism over recent job gains, one grim statistic casts a long shadow over the recovering economy -- a record 44% of the nation's 15 million unemployed have been out of work for more than six months.

And the evidence suggests that many of them may never completely rebuild the working lives they lost.

Never since the Great Depression has the U.S. labor market seen anything like it. The previous high in long-term unemployment was 26% in June 1983, just after the deep downturn of the early 1980s. The 44% rate in March translates into more than 6.5 million people.

In fact, nearly two-thirds of these workers have been jobless for a year or longer, new Labor Department reports show.

On Wednesday, Federal Reserve Chairman Ben S. Bernanke told the congressional Joint Economic Committee that he was "particularly concerned" about the huge number of long-term unemployed.

"Long periods without work erode individuals' skills and hurt future employment prospects," he said. "Younger workers may be particularly adversely affected if a weak labor market prevents them from finding a first job or from gaining important work experience."

Bernanke also reiterated his recent comments that the economy is in the midst of a "moderate" recovery from the recession and that the country needs to address soaring budget deficits. The Fed also expects that its near-zero interest rate policy will continue for an extended period.

The efforts to resuscitate the economy as well as the hardships of unemployed workers are straining the nation's finances too. In normal times, jobless workers can qualify for up to 26 weeks of state unemployment benefits. But the severe economic crisis in the last two years has prompted Washington to help fund jobless benefits for up to 99 weeks in high-unemployment states, including California and Florida.

Federal spending on unemployment benefits could reach $168 billion this year, five times the level in the years just before the recession, according to a report by Pew Charitable Trusts. In addition, tens of billions of dollars more are being spent on food assistance for unemployed workers and their families.

At the same time, government revenues have fallen as Social Security, payroll and other tax receipts have shriveled with fewer jobs and lower earnings. That has contributed to massive fiscal problems in many states.

California, which is expected to report the latest jobless figures for the state Friday, already owes the federal government about $7 billion for unemployment benefit loans and is getting deeper in the hole by the week.

"It's really killing efforts to rein in the deficit," said David Card, an economics professor at UC Berkeley, which has made cuts in faculty pay and course selections.

The rise in long-term unemployment -- coupled with economists' projections of a slow recovery in the job market -- means the toll to individual and government budgets is likely to persist for some time. Labor Department figures suggest there are 5.5 unemployed workers today for each job opening, compared with two job seekers for every opening in 2007.

And the seriousness of the problem is magnified by the enormous scale of job loss during the recession, in which more than 8 million jobs were cut -- on top of the roughly 7 million people who were jobless before it began in 2007.

The economy needs to create about 125,000 jobs a month just to keep pace with the population growth, and the recovery isn't expected this year to produce anywhere near the several hundred thousand jobs that are needed monthly to make a significant dent in the unemployment rate, currently at 9.7%.

As for the kinds of long-term jobs being created, government data show a smattering of gains all across the spectrum -- from minimum-wage to high-income.

But there is no sign yet of a surge in the kinds of stable, above-average-income jobs that have been the backbone of the nation's prosperity in the past. Healthcare and temporary jobs have been leading the pack, but many of the jobs come with relatively modest wages.

The problem has another, less direct effect as well: Because many of the long-term unemployed are older workers, some have little choice but to retire earlier than planned. That means more people will be drawing Social Security and Medicare, and fewer will be contributing to those programs through payroll taxes.

As in previous downturns, a large share of the long-term unemployed are in manufacturing and construction.

But most of today's workers who have been jobless for 27 weeks or more are in sales, office and other service industry jobs, including more than 1 million in management and professional occupations.

Some economists doubt that workers in general would lose skills after just six months or even a year or two out of work.

But there is widespread agreement that, for whatever reasons, long periods of unemployment tend to make it tougher to get reemployed.

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