6.5 Million Workers Have Been Unemployed For More Than Six Months
There was a great deal of high-fiving and rejoicing on Friday when the March job numbers were released, as nonfarm payroll employment increased by 162,000 and the unemployment rate held steady at 9.7%.
"We are adding jobs and the national unemployment rate is stabilizing" was the popular decree.
It's certainly true that the United States has posted a 9.7% unemployment rate for the past three months (January, February and March). However, as is usually the case with the unemployment numbers, things are not exactly as they seem.
The March numbers have emboldened many in Washington to declare that the economy should continue to add jobs at a quickening pace going forward. Just in time as well, as midterm elections are just around the corner.
To those who believe that the unemployment rate has plateaued, let's consider the following:
1. The Congressional Budget Office posted a report in February of 2010, in which they estimated that the average unemployment rate for 2010 would be 10.1%, while the average rate for 2011 would be 9.5%. It doesn't take a genius to see that the CBO believes that unemployment rates are going up from here.
2. Of the 162,000 jobs that were added in March, 40,000 of these were temporary census positions.
3. 9.1 million people were working part-time due to "economic reasons" in March - a number that has continued to trend higher. This represents people who want full-time work but can't find it, so they are forced to take part-time positions.
4. The number of long-term unemployed increased by another 414,000 people to a total of 6.5 million in March. This is an astonishingly high number - last month, a full 44.1% of all unemployed people had been out of a job for at least 27 weeks.
Now, obviously a high number of long-term unemployed is bad for a number of reasons, including:
1. Increased government expenditures for unemployment benefits, which contributes to deficit spending
2. Reduced consumer confidence and consumer spending
3. Reduced personal income tax receipts for the government
The economy will obviously not begin to put in a meaningful recovery until the number of long-term unemployed starts to drop considerably.
Think about it - 6.5 million people is over 2% of the entire population of the United States. The economy will continue to sputter until these people start returning to work in droves.
Which industries will lead the charge in hiring these people though?
Construction? Not until the real estate market in the United States starts to put in a strong recovery.
Manufacturing? Only if people begin to save less and spend more.
Health care? Government? Services?
It's hard to see where all of these jobs are going to come from, especially when you also account for the continued population growth of the United States and decreased consumer spending / access to credit.
There is a reason why a number of prominent economists believe that the United States will have to deal with a long period of chronically high unemployment rates.. sure the US economy will recover, but will it recover enough to put all of these people back to work?
Filed under: The Economic Meltdown