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 Alan Krueger, a respected labor market economist who led President
Barack Obama's Council of Economic Advisers, said those unemployed
long term tended to put less effort into their job hunts than others
and were often viewed by employers as undesirable.
The sobering analysis published on Thursday by the Brookings
Institution, a think tank in Washington, projected that people out
of work for more than six months will increasingly give up their job
search in the coming years.
Their plight could be one of the deepest scars left by the 2007-09
U.S. recession.
While the unemployment rate has fallen quickly over the past year,
most of the workers getting jobs have experienced only brief
stretches of unemployment.
It has yet to be seen whether the long-term unemployed will
eventually get jobs as the economy strengthens or drop out of the
labor force altogether. Krueger's analysis suggests America is
headed towards the latter of those two paths.
"A concerted effort will be needed to raise the employment prospects
of the long-term unemployed, especially as they are likely to
withdraw from the job market at an increasing rate," Krueger wrote
in the paper, which was coauthored by his Princeton University
colleagues Judd Cramer and David Cho.
In February, there were 3.8 million people without jobs who had been
actively looking for work for at least 27 weeks, nearly three times
more than on the eve of the recession.
Krueger and his coauthors found the long-term unemployed were
especially prone to dropping out of the workforce. While that
pattern is suppressed in the aftermath of recession, the researchers
concluded it would reassert itself in coming years.
It also appears unlikely a strengthening economy will benefit the
long-term unemployed much. The researchers found that even in states
with low jobless rates such as North Dakota, where the economy is
booming thanks to surging oil output, the long-term unemployed don't
seem to be doing any better.
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The paper also suggested the U.S. Federal Reserve would do better to
monitor the dwindling ranks of short-term unemployed than the
overall jobless rate when trying to gauge when a tightening labor
market might fuel inflationary wage pressures.
The research supported the growing view among economists that those
out of work for an extended period don't suppress wage growth much,
perhaps because they aren't trying very hard to get jobs or aren't
seriously considered when they apply.
That means there could be less slack in the job market than would be
suggested by the current unemployment rate of 6.7 percent. The
number of short-term unemployed workers has fallen quickly in recent
years and is now at roughly the same level as it was in 2004.
"Further declines in short-term unemployment would be expected to be
associated with rising inflation and stronger real wage growth," the
economists wrote.
While this view has gained currency among academic economists, Fed
Chair Janet Yellen on Wednesday said recent evidence supporting this
conclusion was far from conclusive. She said she remained concerned
about people who gone for long stretches without work.
(Reporting by Jason Lange; editing by Meredith Mazzilli)
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