Long Term Unemployment Remains High While Overall Rate Drops

  

Above are thumbnails of new charts I have constructed utilizing BLS data (see source on Figure item 3 below). The charts are described as follows:

1: Chart of Long Term Unemployment (i. e., people unemployed 27 weeks or more) (in Red), as compared to overall unemployment rate (in Blue).

2. Same chart as above, with dotted lines indicating trends in both Long Term Unemployment and Overall

3. Chart showing Overall Unemployment rate since 2002 (in Blue, utilizing scale on right of chart), and 4 categories of unemployment durations:

 (a) Percent of Unemployed Long Term (>27 Weeks, in Red,    utilizing scale on left of chart),

 (b) Percent of Unemployed 15 to 26 Weeks            (in Black, utilizing scale on left of chart),

 (c) Percent of Unemployed  5 to  14 Weeks            (in Green, utilizing scale on left of chart),

 (d) Percent of Unemployed  Less Than 5 Weeks     (in Magenta, utilizing scale on left of chart).

4. Chart of the Percent Job Losses in the 12 Post World War II Recessions, where I have made 2 extrapolations of the time to recover lost jobs, optimistic extrapolation for full recovery: April of 2014, and pessimistic extrapolation for full recovery: December of 2015.

Long term unemployed (i. e., people unemployed for 27 weeks or more) now make up about 43% of all people who are unemployed. Of the remaining 57% of the unemployed, they split up equally between unemployment durations of a) less than 5 weeks, b) 5 weeks to 14 weeks, and c) 15 to 26 weeks (all data is from the Bureau of Labor Statistics BLS). So there are about twice as many  "Long Term Unemployed" as any of the other categories a) to c) above. This is highly unusual compared to the previous 11 recessions since World War II. Why?

One way to understand this is to look at the last chart in my blog www.abelesnik.blogspot.com above (entitled: "Percent Job Losses In Post WWII Recessions"). This chart says that the current economic decline (also referred to as the "Great Recssion") is expected to last about 4 times  longer than a typical recession since WWII. This results in more people remaining unemployed for longer times, and so partially can explain the doubling of the Long Term Unemployment component (compared to the other durations).

Long Term Unemployment (LTU) is a serious problem, because people's skills and capabilities become stale, out of date, and eventually uncompetitive, resulting in a vicious cycle which further reduces the LTU's chances of finding employment. Obama administration incentives to business has proved ineffectual, primarily because of their temporary nature. In stark contrast to Obama, the Reagan permanent tax cut (being permanent) succeeded in launching a decades long powerful economic resurgence and period of growth in the US.

Policy areas with the most promise to supercharge the US Economy (and thus help the LTUs) are: 1) Comprehensive Tax Reform, and 2) Energy. The presentation last week of the Fiscal 2013 budget, the killing of the Keystone pipeline, and this week's touting of Algae as the great hope for American energy production, are what is on offer from the administration. Life is easy, comedy is hard.