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Long-term unemployment is falling for first time during pandemic

Long-term unemployment is falling for first time during pandemic

04 Jun 2021

A store advertises a Help Wanted sign in Annapolis, Maryland, on May 12, 2021.

JIM WATSON | AFP | Getty Images

Long-term unemployment fell for the second straight month in May, an encouraging shift away from the recent near-record levels fueled by the economic carnage of the Covid pandemic.

Economists classify long-term unemployment as a period of joblessness that exceeds six months.

It’s an especially risky financial period for households, during which it also generally becomes more difficult to find a new job.

The number of long-term unemployed fell by 431,000 in May to 3.8 million people — accounting for 40.9% of the total unemployed, according to the Bureau of Labor Statistics. That’s a reduction from 43% in April and 43.4% in March.

March’s share had flirted with the all-time high of 45.5% in April 2010, in the aftermath of the Great Recession.

“It’s an encouraging sign to see long-term unemployment falling,” said Daniel Zhao, a senior economist at Glassdoor, a job and recruiting site. “It’s always going to be a hard number to budge.”

The number of workers out of work over a year also fell in May, by about 31,000 people to roughly 2.6 million. They accounted for nearly 30% of all unemployed workers. (These figures don’t include a seasonal adjustment.)

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However, the reduction may not be due solely to job gains — some long-term unemployed may have dropped out of the labor force, according to Nick Bunker, an economist at job site Indeed.

“Was this decline for a good reason as opposed to a bad reason?” Bunker said.

The data to make that assessment isn’t yet available, he said.

Scarring effects

Often, those out of the workforce a long time have the toughest time getting news jobs, Zhao said. That may be due to factors like skills atrophying or lost connections with networks and employers, he said.

It’s also a period during which household income may drop significantly. Their future earnings potential generally declines and the odds of losing a job (if they find one) down the road increase, according to labor economists.

There remain 2.6 million more long-term unemployed workers versus pre-pandemic levels, according to the Bureau of Labor Statistics.

“That’s generally where you see permanent economic scarring,” Zhao said of the long-term unemployed.

Generally, jobless workers can only collect state unemployment benefits for up to six months. (Some states offer less, however.)

Federal lawmakers have expanded the benefit period three times via pandemic-relief legislation and broadened the pool of workers eligible for unemployment compensation. The long-term unemployed now qualify for aid through Sept. 6.

However, two dozen states are cutting off benefits in June or July, claiming enhanced benefits are creating labor shortages. Critics say temporary pandemic-era factors like ongoing health risks and child-care challenges are more to blame.

“It’s a group of workers that are obviously having a very tough time right now, and it’s a large chunk of the unemployed,” Bunker said. “If employers are hiring folks from that pool, the possibility of other unemployed workers getting jobs is fairly strong.”