The situation for the long-term unemployed just keeps sounding worse. They're less likely to be called in for a job interview than someone who has been out of work for a shorter period of time, researchers found last year. And new research says that even if they get a job, their long unemployment spell is likely to continue hanging over them.
"It appears that reemployment does not fully reset the clock for the long-term unemployed," argues a new paper by Alan Krueger, the former head of the White House Council of Economic Advisers, and fellow Princeton University economists Judd Cramer and David Cho.
The long-term unemployed have a one-in-10 chance of returning to the labor force in any given month. But 15 months later, they're more than twice as likely to have left than to have settled into steady, full-time employment, according to the paper, which was released Thursday as part of a Brookings Institution conference on the economy.
Currently, 3.8 million Americans have been out of work for 27 weeks or more, which is the Labor Department's definition of long-term unemployment. African-Americans, who make up 10 percent of employed Americans, make up 22 percent of the long-term unemployed. Compared with their short-term uemployed counterparts, a higher proportion of the long-term unemployed are over 50 and have never married. A majority come from blue-collar and sales and service jobs.
Individuals with long and short spells of unemployment tend to return to the industries from which they were displaced, the paper's authors say. "These results suggest that assisting unemployed workers to transition to expanding sectors of the economy, such as health care, professional and business services, and management, is a major challenge," Krueger, Cramer, and Cho write.
They also argue that the long-term unemployed don't appear to exert much pressure on the country's inflation or wage growth. Researchers at the New York Federal Reserve Bank drew a similar conclusion in a February study on wage growth, although Fed Chair Janet Yellen said Wednesday that she thought the question was still up for debate.
"With respect to the issue of short-term unemployment, and it's being more relevant for inflation and a better measure of the labor market, I've seen research along those lines," Yellen told reporters at a press conference Wednesday. "I think it would be tremendously premature to adopt any notion that says that that is an accurate read on either how inflation is determined or what constitutes slack in the labor market."
Gauging the amount of labor-market slack correctly is important for the Fed, because misjudging could lead to policy choices that result in higher or lower inflation, or a slower labor-market recovery, than the central bank desires.
Krueger, Cramer, and Cho show that the long-term unemployed don't seem to fare better in states with lower overall unemployment rates—evidence, they say, that the long-term unemployed tend to be on the labor market's fringes even in places where the economy is healthy.
They exist on the margins for two reasons: The long-term unemployed become discouraged about their prospects and stop looking for work; and employers discriminate against them. These issues could be seen as "complementary and reinforcing," the authors say, because discrimination could lead to more discouragement for the workers.
"To a considerable extent, they are an unlucky subset of the unemployed," the paper concludes.