14/4/21: The share of those in unemployment > 27 weeks is rising

 

One way to look at the state of the real (as opposed to financialized and corporate-value focused) economy is to look at unemployment. And one of the strongest indicators of longer term changes in the structure of the real economy is the fate of the longer term unemployed. Here is an interesting snapshot of data: the percentage of those unemployed for 27 week or longer in the total pool of the unemployed. The higher the number, the more structural is the unemployment problem. 

If the above is not clear enough, here is the same data expressed in the form of the range for each 12 months period (rolling) between maximum share of the longer term unemployed in the overall pool of unemployment and the minimum share:

All of the above suggests we are in deep trouble. And this trouble has been persistent since the Great Recession: we are witnessing a dramatic increase in the duration of unemployment spells. Part of this is due to the impact of Covid19 pandemic concentrated in specific sectors. Part of this is down to the generosity of unemployment benefits supplements and direct subsidies during the pandemic. Part of it is also down to the longer term changes in the U.S. labor markets and changes in households' composition and investment/consumption patterns.

Irrespective of the causes, the problem is obvious: the longer the person remains unemployed, the sharper is the depreciation of skills and their employability. If this (post-2008) experience is the 'new normal', America is developing a massive class of disillusioned and human capital poor workers. 

26/11/2014: A Chart to Illustrate the Danger of Long-Term Unemployment

Quite a powerful reminder to us all as to the extent of the damage done by longer term unemployment. Here is the US data for the probability of regaining the job based on duration in unemployment:

Source: http://oregoneconomicanalysis.com/2014/11/10/graph-of-the-week-transition-probabilities/

Ignore the numbers on the right (for now):

• Probability of regaining a job for those with less than 5 weeks duration of unemployment is ca 35-36% currently in the US.
• Probability of regaining a job for those with unemployment duration of 15-26 weeks (under 6 months) is roughly 18%. That's half the rate of those at the shortest end of unemployment duration.
• Probability of regaining a job for those in unemployment longer than 53 weeks (roughly year +) is just a notch above 10%.

Another set of regularities worth noting is:

• For all durations, probability of regaining a job after an unemployment spell is showing a downward trend since the late 1990s.
• The steepest decline in probability of regaining the job (trend) is evident for mid-range duration.

This is scary. In effect this suggests that unemployment in the US is becoming more structural over time, despite the claims of the rising economic systems resilience and flexibility. 

Now, onto numbers on the right: these reflect how much of the gap in probability of regaining a job between the pre-crisis high and the crisis period low has been closed to-date.  Now, the author of the post is celebrating that the gap is closing. Fine by me. except do remember - the peaks referenced in the chart go back to mid-2007. Which means we are now 7 years and a quarter, or so, that the crisis has been raging and the best the US has to show is 71% gap closure for short term unemployed. This is what we today call 'the best recovery' amongst the advanced economies. Imagine how horrific it is in the 'less impressive recoveries' of other advanced economies.