'The shock from the coronavirus is becoming more and more enduring': Here's how long-term unemployment is becoming the most overlooked disaster in the US economy
- Even though the unemployment rate declined to 7.9% and 661,000 jobs were added last month, the uptick in the number of Americans who are long-term unemployed shows there is still a long way to go before the jobs market fully recovers.
- The net change in the number of people unemployed for 27 weeks or longer was the largest month-over-month change since this data was first recorded; 781,000 more people were considered long-term unemployed in September than in August.
- Although the number of long-term unemployed is nowhere near the 6.8 million peak in April 2010 during the Great Recession, some economists believe it is likely that number will continue to rise.
- Economists agree that having a widely available vaccine will help get the long-term unemployed back into the workforce.
- An additional problem is that it can be harder for people who are out of the workforce for a long time to get a job.
Despite a drop in the unemployment rate and 661,000 more jobs added last month, the September jobs report shows the US jobs market still has a long way to go before recovering from the coronavirus pandemic.
The number of long-term unemployed Americans is rising, as is the number of people who have permanently lost jobs rather than being temporarily furloughed. Meanwhile, the share of Americans working or looking for work declined last month.All of these suggest that many workers who lost their jobs are having difficulty returning to work.Advertisement
Long-term unemployment had the biggest spike on recordThe monthly change in the number of people who have been unemployed for at least 27 weeks was the largest increase since this number was first tracked in 1948. 781,000 more people were long-term unemployed in September than in August, with a total of 2.4 million. That is 19.1% of the total number of people unemployed in the US, per a chart from Axios.
"Longer and longer durations of
Shierholz said she expected the large uptick this past month because the large number of people who have been unemployed since the beginning of the economic downturn are now considered long-term unemployed, and she expects this number to continue to rise.Evercore ISI economist Ernie Tedeschi told Business Insider that it is likely that permanent businesses closures and the lack of available jobs contribute to this rising number. Tedeschi said there needs to be a "hotter, better
"So the fact that long term unemployment is not yet at its Great Recession peak doesn't give me comfort at all….We could very well be in a recession where long-term unemployment meets or exceeds where it was in the Great Recession at its peak," Tedeschi said.
Permanent job losses are piling up and more Americans are leaving the workforce
The number of people who reported permanently losing their job, instead of going on a furlough or temporary layoff, also continues to rise as the pandemic continues."I think what [the long-term unemployment rate and permanent job losers] show is that beneath the sort of overall improvement, there's a large and growing piece of the people who have been displaced by the pandemic who are running out of options," Tedeschi told Business Insider.Advertisement
And despite employment growth in recent months, the labor force participation rate declined by 0.3 percentage points to 61.4% in September, signalling an increasing number of Americans no longer actively looking for work. This rate is still below its pre-pandemic rate of 63.4% in February. Last month, 865,000 women dropped out of the workforce.
Additionally, it can be harder for people to get back into the workforce the longer they are out of work. Bunker said sometimes employers look "less kindly" at large gaps on a resume, but it is hard to know if this will be true now given the unusual economic situation.
A vaccine and more financial assistance are neededBunker said there needs to be a vaccine for the coronavirus to combat the continuing increase in long-term unemployed workers.Advertisement
"One, we need to see the virus be under control. Two, there needs to be policy actions taken both by monetary and fiscal policymakers to make sure that the economic recovery has enough momentum to be self-sustaining and get up to a [point] where people are getting back to jobs at a brisk pace so that they are not waiting there for months or potentially years to get back to work," Bunker said.
Tedeschi and Shierholz agreed and also both note that more financial support is needed to not only help unemployed Americans but to help the economy recover.The additional $600 in unemployment benefits expired at the end of July and the Pandemic Unemployment Assistance program is set to expire at the end of the year. More relief is needed to help Americans who are out of work and in turn help the economy, according to the economists we talked to.Advertisement
Shierholz said if Congress were to extend unemployment insurance under the CARES Act, it will add over 5 million jobs."We are still seeing strong job growth, but it is disturbingly slow given the huge gash we still have in the labor market, and without Congress stepping in to do more we could be facing another recession" Shierholz said.
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