Forget the Good Jobs Report, Long-Term Unemployment Is Still Terrifying

There isn't a more urgent crisis than putting the long-term jobless back to work

(Reuters)

Jobs! The economy added 236,000 of them in February, which is good. And, as my colleague Derek Thompson points out, it added more construction jobs than at any time since March of 2007, which is even better. After all, housing is what makes recoveries go boom.

But let's be honest. Even with our nascent housing recovery, the overall recovery is still leaving behind far too many for far too long. People looking for work for 6-months or longer -- the long-term unemployed -- jumped by 89,000 last month. It's been three years since the labor market bottomed, but the long-term unemployment rate is still higher than it's been at any point since 1948. Technically-speaking, we're still in a deep hole.

Well, that's not quite true. The hole is depressingly deep for the long-term unemployed, but not so much for others. We increasingly have a bifurcated labor market. As I pointed out back in December, the Boston Fed has found that the job market looks normal for people who have been out of work for less than 6-months, and horribly dysfunctional for people who have been out of work longer than that. It doesn't matter how old you are, or the industry you are in, or even how much education you have -- the only thing that matters, as far as employers are concerned, is how long you have been unemployed.

Why?

It's about loss of skills, loss of trust, and loss of networks. The longer people are out of work, the more they presumably forget. That's the loss of skills. But even if that's not actually true, and it might not be, employers assume it is -- there's a stigma to being out of work that long. That's the loss of trust. Now, that's particularly hard for the long-term unemployed to overcome since being unemployed for so long hurts the kind of professional networks that are often so important to finding a job. The only way for the long-term unemployed to get a job is to already have one. It's a vicious catch-22.

In other words, the long-term unemployed are at the back of the jobs line. And it's quite a long line. As you can see below, the job calculator from the Hamilton Project estimates it would take us 8 years to get back to full employment at our current 3-month average of 190,000 jobs-a-month. The long-term unemployed will be unemployable by then.

It gets worse. As the Bipartisan Policy Center points out, the sequester cuts long-term unemployment benefits by 10 percent. (And if you think those benefits are disincentivizing them from finding work, ask yourself why there hasn't been any shift in the Beveridge Curve for the shorter-term unemployed, who also get benefits). 

What is to be done? Well, as Megan McArdle argues, the easiest way to put the long-term unemployed to work is ... to directly put them back to work. In other words, the federal government should become a hirer-of-last-resort for the long-term jobless -- or, at the very least, create a hiring preference for them. It's probably the fiscally conservative thing to do. Long-term unemployment isn't just an individual tragedy; it's a collective one too. Left to linger, it decreases our productive capacity and increases the strain on our safety net. 

It's no time to turn to the deficit. Not when so many people are still waiting for the recovery to show up for them.