By Jackie Simmonds, NEJS Blog Editor
A new study by the Pew Fiscal Analysis Initiative, released in April 2010, provides the most updated view of the impact of unemployment in this country not only to the job seeker but to the Federal government. It calculates the percentage of people who have been unemployed for a year or more, as well as illustrating the extent of the country’s long-term unemployment problem and its impact on the nation’s fiscal condition. While the every day grind of trying to find a job may give you a shockingly real litmus test of the state of the market, it never hurts to get the official picture and continue to monitor the changes. After all this issue impacts you on a daily basis and these studies impact future relief initiatives for the unemployed.
The government defines “long-term unemployment” as a jobless period of six months or longer. In March 2010, over 44% of unemployed Americans met or exceeded that definition making this the highest rate since World War II. To put it into perspective, in the last severe recession during the early 1980s, the percentage of workers unemployed for six months or longer peaked at 26 percent in 1983.
The Bureau of Labor statistics reports that the overall unemployment rate was 9.7% in March 2010. This means there were about 15 million people who were actively searching for employment. In February 2010, 13 states and the District of Columbia had unemployment rates higher than 10%, and six states (California, Florida, Michigan, Nevada, Rhode Island, and South Carolina) had a rate of at least 12%. And, as we all know by now, these numbers do not include all the unemployed. When you add in all the people who are discouraged and stopped seeking employment, people who decided to retire early rather than keep searching, young people who have delayed their entry into the work force, and people who would prefer full-time employment but have been forced to accept part-time work that number is closer to 16.9%.
The Pew study puts some cold, hard clarity to the numbers.
- As of December 2009, 23% of the nearly 15 million Americans who are unemployed have been jobless for a year or more. That equals 3.4 million people, roughly equivalent to the population of the state of Connecticut.
- Long-term unemployment cuts across every industry and occupation. Even in fields reporting overall low rates, workers who become unemployed are remaining unemployed for a long time.
- Long-term unemployment cuts across people of all ages.
- The unemployment rate for workers older than 55 was 7.0% in December 2009, below the national average for all workers.
- Workers 55 or older are less likely to become unemployed, but those who do are more likely to stay unemployed for a long period of time.
- Nearly 30% of unemployed people 55 or older have been jobless for a year or longer—a higher rate than any other age group.
- Unemployment among workers between the ages of 20 and 24 rose from 8.7% in December 2007 to 14.7% in December 2009.
- Between the ages of 20 and 24, only 18% had been out of work for a year or longer in December 2009.
- In December 2009, the overall unemployment rate for whites was 8.8%, 15.6% for African Americans, and 12.9% for Hispanics.
- Education only provides a limited amount of protection against long term unemployment once a person has lost their job.
- 21% of unemployed workers with a bachelor’s degree have been without work for a year or longer, compared to 27% of unemployed high school graduates and 23% of unemployed high school drop-outs.
- The unemployment rate for workers 25 or older without a high-school diploma rose from 8.2% in December 2007 to 15.7% in December 2009.
The longer you are unemployed the likelihood of finding a job declines. A long unemployment spell can mark the job seeker as undesirable and losing their skill set, making it more difficult to compete with others for a position. What does this mean for job seekers who pushing over the year mark? These workers suffer the largest reductions in earnings upon returning to work.
The government has responded to the lengthy unemployment time by increasing benefits which has, in turn impacted the federal budget. Additional aid brought into play during this period has included:
- Congress has approved extending unemployment benefits beyond the normal 26-week limit. Those extensions cost nearly $44 billion in fiscal year 2009.
- The federal government also has increased food assistance and paid for a greater share of health-care coverage for those who have been without work for a long time.
People pay less in income taxes when they are out of work, so long-term unemployment also has reduced federal revenue. The on-going issue of extending benefits and how the government is going to pay for them seems to be coming to a head. As reported on Boston.com it looks unlikely at this point that additional unemployment extensions will be granted.
Prior economic recessions have shown a pattern that includes continued job loss after the economy starts to turn around. Job losses continued for about two years after the 2001 downturn, and employment numbers did not return to pre-recession highs until 2005. The Congressional Budget Office projects that the unemployment rate will remain above 9 percent through 2011 and that the rate will not decline to 5 percent—the ” natural rate of unemployment”—until 2016.
There is a lot of additional information and graphs provided in this report making it easy to understand the impact of unemployment to various groups. I encourage you to take a look and understand our current position. And don’t forget to put into place strategies that continue to make you look attractive to perspective employers instead of a liability. Keep your skills sharp by volunteering your expertise or doing some consulting so that you don’t look stale to employers.
