MNI INTERVIEW: Half of US Unemployment To Be Long-Term: Ex-BLS

Americans without a job for six months or more could surge to account for half of total unemployment, former Bureau of Labor Statistics Commissioner Katharine Abraham told MNI.

The share of Americans meeting the definition of long-term joblessness will likely overtake the record 45% reached during the Great Recession, though Abraham, now a professor of economics at the University of Maryland, said it could take some time to get there. The duration of unemployment continued to grow through 2011 even though the last recession officially ended in 2009, she said.

The climb predicted by Abraham would go much higher than the current 12% rate of long-term unemployment in the August jobs report from the BLS.

"I don't know when exactly the timing is going to be, but I wouldn't be surprised to see that kind of share of people ending up long-term unemployed," she said in an interview. "That's almost inevitably turning into a significant number of people ending up long-term unemployed."

HIDDEN WEAKNESS

The increase could mask job market weakness because unemployed workers are significantly more likely to become discouraged and exit the labor force after six months. There may soon be a large number of departures following the first round of Covid-19 layoffs that began in March. The economy shed 22 million jobs in late March and April, and less than half of those jobs have been recovered.

Lengthening joblessness is evident in the August figures. While the unemployment rate fell below the Fed's year-end estimate by nearly a full percentage point to 8.4%, the median duration of unemployment rose 2.5 weeks to 16.2 weeks. That's nearly double last year's 8.6 weeks.

"If people who would have been unemployed leave the labor force, that's obviously going to make the unemployment rate look less bad," Abraham said.

"The unemployment rate isn't a sufficient statistic to understand what's going on in the labor market."

The Federal Reserve and the IMF have warned about dangers of "scarring" as workers drop out or lose valuable skills, urging more fiscal support to boost employment and retraining. The Fed also changed its long-term full employment goal to target shortfalls from that mark, and more people being left out of the recovery would suggest extended monetary stimulus.

SCARRING RISK

"There is a risk of scarring if we start to see increases in long-term unemployment," Abraham said.

"There's evidence that being long-term unemployed really disadvantages people," she added, because employers favor applicants without large gaps in their work histories.

Extended unemployment benefits have been instrumental in buoying the labor market during the Covid-19 crisis, she said. Another extension could prevent millions of Americans from becoming long-term unemployed and dropping out of the labor force.

While Congress offered up to 39 weeks of weekly benefits through the end of the year under the CARES Act, talks on further aid have stalled.

"It could be a cushion, it's a reason to keep looking" for a job, she said of more fiscal action.