Is Long-Term Unemployment Finally Returning to Normal?

RCM ^ | 08/04/2014 | Jeffrey Dorfman

[SeekAndFind]

For all the fuss made and dollars spent it is not clear that the 2007-2009 recession was worse than the 1980-1982 downturn when Fed Chairman Paul Volker defeated inflation. For example, unemployment peaked at 10.8 percent then, higher than the 10 percent maximum in the most recent recession. However, this most recent recession and the weak recovery that has followed has been the undisputed champion for long-term unemployment.

The U.S. government defines long-term unemployment as a period of unemployment that lasts 27 weeks or longer, roughly six months or more. While overall unemployment was relatively normal for a severe recession, long-term unemployment peaked in April 2010 at nearly double its previous record high, with 6.8 million people counted as long-term unemployed. Such long-term unemployment is particularly important because of the potentially permanent damage done to human capital.

Economists debate whether long bouts of unemployment make applicants less attractive to employers with at least a little evidence that when overall employment is high, a long time between jobs is not held against you. However, the consensus is that job skills erode, hurting earning potential. Worse, at some point, especially for older people, a long spell of unemployment may become involuntary early retirement. If long-term unemployment causes the permanent loss of human capital, then policy makers should be addressing the problem.

A key point of debate among economists and policy makers has been over whether the repeated extension of unemployment benefits was encouraging long-term unemployment by allowing a longer job search in hopes of a better job. There were even worries of a large, permanent population of unemployed people, a return to the days when people stayed on welfare for decades.

[Fresh Wind]

If you own a small business, are you in the labor force?

Good question. I would assume so, since you would be filing a return for that business (schedules C, SE, issuing 1099s, etc). So, the IRS knows what you're doing, but do they tell the BLS? No idea. I am retired, so I should be out of the labor force, but I am also a sole proprietor small business, that is, I am self-employed. I have no idea what category the government has me in.

The government needs a whole new set of realistic definitions, but they will never do that for political reasons.

[Mastador1]

My response to this article is simply: HAHAHAHAHAHAHAHAHAHAHAHA!

[trisham]

"Is freedom anything else than the right to live as we wish?
Nothing else."

~Epictetus

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[tbw2]

No, it isn’t normal - it’s just that millions moved over to Social Security Disability and don’t count as unemployed anymore.