WASHINGTON – A new study documents the bleak plight of Americans who have been unemployed for more than six months: Just 11 percent of them, on average, will ever regain steady full-time work.
The report by three Princeton University economists shows the extent to which the long-term unemployed have been shunted to the sidelines of the U.S. economy since the recession. The long-term jobless number 3.8 million, or 37 percent of all unemployed Americans.
The long-term unemployed are more than twice as likely to stop looking for a job than to find one, according to the paper co-written by Alan Krueger, formerly President Barack Obama’s chief economic adviser. And when they exit the labor force, the long-term unemployed tend to say they no longer want a job.
During any given month from 2008 to 2012, barely more than 1 in 10 of the long-term unemployed had found full-time work. Their troubles were similar in states with high as well as low unemployment rates.
The analysis shows that a better predictor of hiring comes from the short-term unemployed, who are far more likely to be rehired.
Across the country, levels of short-term unemployment have essentially returned to pre-recession averages, even though the overall national unemployment rate remains historically high at 6.7 percent. The paper says that based on the number of short-term unemployed, further job gains could lead to rising inflation and stronger real wage growth.
That’s because the relative exclusion of the long-term unemployed means that employers must choose from among a limited supply of workers. That trend could push up prices.
Federal Reserve Chair Janet Yellen on Wednesday cited flat wages and low inflation running below the Fed’s 2 percent target as evidence that the Fed should continue to support the recovery by keeping interest rates extremely low.
The number of people unemployed for more than six months has tripled since the recession began at the end of 2007. It peaked at 6.77 million in early 2010 and has declined to a still-high level as more unemployed workers have ended their job hunts and are no longer counted as unemployed.
The share of Americans who are either working or looking for work has fallen to a 35-year low. Some long-term unemployed have reached retirement age. Others have obtained federal disability benefits. Many have survived through side jobs and help from relatives and friends.
There’s also the possibility that a substantial share of the long-term unemployed have stopped looking for work because the federal government’s emergency benefits program, which required them to look for jobs, expired at the end of 2013.