If you’ve been out of work for 6 months or more, and you’ve gotten discouraged by the constant rejections, and have all but given up, take heart: The economy is showing signs of improvement.
First, the overall unemployment rate has been falling of late – from 6.7 to 6.1 percent over the past six months – powered in part by an economy that added some 235,000 jobs in July.
Sure, we’ve seen that before. But for so many years, the long-term unemployed – those who have been unemployed out of the job market for six months or longer – have been locked out of the party! Employers had been snatching up people who recently lost their jobs, rather than giving a shot at people who had been on the sidelines for half a year or longer.
But recent numbers are giving these wallflowers of the labor market some cause for hope: Almost all the decline in unemployment over the last six months has come as a result of increased hiring among the ranks of the long-term unemployed.
Funny how that happened almost as soon as funding for extended unemployment benefits expired. But for those of you who have felt locked out for a long time, this is good news, regardless of the situation. It means that even if you assume the most cynical explanation imaginable, people who have been out of the work force for six months, a year, two years, are having some success getting hired. Employers are picking them up.
According to one Federal Reserve study, about 38 percent of those who were among the ranks of the long-term unemployed a year ago were able to find jobs by today. That’s a big improvement over a couple of years ago, when prospects for those seeking work after six months of employment were absolutely dismal.
The same Fed study linked to above showed a decided uptick in recent months in the likelihood of an individual transitioning from long-term unemployment to employment, and a downtick in the percentage of the long-term unemployed who transitioned from unemployment to non-participation (that is, they had given up looking for work) over the same time period.
Furthermore, the stability of the jobs these people are obtaining seems to be improving, though the stability of that work has a long way to go before it approaches pre-recession levels.
Taking a broader view, the improvement in unemployment numbers seems to have some power behind it. The U.S. economy has been expanding at a robust 4 percent annualized rate over the spring – leading to an increase in labor demand. Some of it may be the release of pent up demand that was temporarily depressed by the harsh winter, but it is welcome news nevertheless.
Bond investors, however, may be getting a little nervous: The recent economic growth spurt and unemployment improvement may give the Fed some more wiggle room to increase interest rates to prevent inflation – which would cause the price of most investment-grade bonds to decline.
Despite the low raw unemployment numbers, a 6.1 percent today is a much more discouraging figure than 6.1 percent was even five years ago. This is because of the steady decline in the labor force participation rate – the percentage of adults actually engaged in the labor force. This rate adds back discouraged workers and the disabled. According to University of Maryland economist Peter Morici, if the labor force participation rate had held steady at the rate it was in 2001, then today’s unemployment rate would look a lot more like 12 percent than 6.1 percent.
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