Why The Job Market is Even Worse Than You Think
Nation’s first job loss in more than four years tells only part of the story of the weak labor market. The ranks of the long-term unemployed are growing.
By Chris Isidore, CNNMoney.com senior writer
NEW YORK (CNNMoney.com) — A government report on January jobs showing that employers trimmed payrolls for the first time in four years set off alarm bells.
But the report, which was released Friday, tells only part of the story about the underlying weakness in the labor market.
The number of Americans out of work for at least six months is rising – reaching levels more typically seen deep into a recession or period of job contraction, not at the beginning.
And while some economists believe that the drop in jobs reported in January might later be revised away to show a narrow gain, it’s clear that the rise in long-term unemployment is a far more established trend and one economists say isn’t going away anytime soon.
Harder to find a new job. The number of long-term unemployed stood at a seasonally-adjusted 1.4 million in January, up about 21% from year-earlier levels and up 3% from the previous month. The full-year average for 2007 was 1.2 million long-term unemployed, nearly double the reading for 2000 – just before the last recession.
For all of 2007, about 17.6% of those who were unemployed had been out of work six months or more. That compares to only 11.4% who were long-term unemployed in 2000.
And while the unemployment rate dropped to 4.9% in January from 5% in December, the latest reading showed 18.3% of the unemployed have now been out of work for at least six months.
“You have to understand that 5% unemployment today is worse than 5% unemployment 10-15 years ago,” said Jason Furman, senior fellow, Brookings Institution.
Furman and others say long-term unemployment is not just a problem for those struggling to find jobs. It poses a risk for the economy as a whole and cuts into household earnings and economic output.
If 5% of the labor force is unemployed for a short time as they switch jobs, they could keep spending, drawing on a combination of government assistance and personal savings.