Friday, February 25, 2011

The distressing distribution of unemployment

We know that unemployment is still very high, around 9% of the labor force. Initial jobless claims fell last week to below 400,000, but the 4 week moving average is still right at 400,000. Historically, in a healthy economy this number should be somewhere between 300,000 and 350,000. But we are slowly moving in the right direction and the overall unemployment rate should start to fall (que dios me escuche!)

However, the way unemployment is currently distributed across the population makes me fear that, without some type of effective intervention, the new equilibrium unemployment rate will be higher than what we've seen in the past.

The share of unemployment that is long term (more than 27 weeks) is very high (almost half of the currently unemployed have been so for more than 27 weeks!), and the unemployment rate for uneducated workers aged 25 or greater is also very high (around 14% compared to around 5% for workers with at least a BA).

Long term unemployment always rises in recessions, but this case is exceptional as can be seen in the following graph (clik the pic for a more depressing image):

Today, Tyler links to an article where employers at a job fair are discouraging currently unemployed workers from filling out applications!

Here's a graph of unemployment broken out by education level (clik the pic for a more depressing image):

I know that I haven't shown that the long term unemployed and the low education unemployed are the same people, but I am pretty sure that at least a big chunk of them are, and it's a real problem because the obvious policy response would be to educate them and that is neither quick, easy, or cheap.

But the likely combination of persistent high unemployment and low earnings for folks with low education and America's increasingly dismal record of turning out quality high school graduates is truly distressing.
Hat tip to Calculated Risk for the excellent graphics.


John Thacker said...

While increasing unemployment benefits duration to historic lengths may contribute some, I have a hard time believing that it's entirely responsible.

Anonymous said...

Nobody mentions the fact that the Pelosi-Reid gang raised the minimum wage by 41% from mid-2007 to mid-2009, just in time for the recession. So why are we surprised that there is very high unemployment in the less educated, among teenagers, and that a lot of unemployment is very long term? We have priced those people out of the labor market.

aub said...

Thanks, Anonymous. I was just thinking along the same lines. Have any studies looked at the impact of the MW raise on the recession?

Norman said...

It seems to me the trick is identifying "some type of effective intervention," the key word being *effective.* Aside from the political difficulty of getting enough people on board with any particular intervention, I'm not sure what the right intervention(s) would be at this point.