February 09, 2015
In December of 2007, the unemployment rate rose above 5 percent for the first time in over two years. That same month, the economy entered its longest recession since the Great Depression.
By the official end of the recession in June 2009, unemployment had risen to 9.5 percent. The rate peaked at 10.0 percent in October of that year before finally beginning to come back down.
As I’ve written elsewhere, the unemployment rate is a poor measure of the condition of today’s labor market. In particular, the drop in the unemployment rate since 2009 greatly overstates the labor market’s recovery.
But just as importantly, the unemployment rate doesn’t tell us much about the misery of those who actually experience unemployment. If spells of unemployment are short and don’t substantially decrease a worker’s standard of living, unemployment may not actually inflict much harm on those who experience it; but if spells of unemployment are long and are associated with substantial drops in income, they can be devastating for the unemployed.
And on that note, unemployment today is a far more miserable experience than it was in December 2007. That month the average and median durations of unemployment stood at 16.6 and 8.4 weeks, respectively. Both figures increased substantially over the next few years, with the average duration of unemployment more than doubling and the median duration of unemployment tripling. Last month, the average duration stood at 32.3 weeks, with half of all unemployed workers being out of work 13.4 weeks or longer.
What these figures reflect is the rise of long-term unemployment. In December 2007, just 17.4 percent of the unemployed had been out of work for over half a year; over two-thirds had been out of work less than 15 weeks. But long-term unemployment became much more prevalent during and immediately following the recession, to the point where long-term unemployment peaked at 45.5 percent of all unemployment in April 2010. The graph below shows how the unemployed came to face longer spells of unemployment after 2007:
Even as of January 2015, long-term unemployment had only fallen to 31.5 percent of total unemployment, still up 14.1 percentage points from the beginning of the recession. Today’s unemployed Americans are far more likely to experience long stints of joblessness than those who were unemployed in December 2007.
The negative effects of long-term unemployment could have been at least partially mitigated by greater public support for the long-term unemployed. But instead of supporting those in need, Congress decided to cut off unemployment insurance (UI) for Americans who been unemployed over 26 weeks. This change in law means that a large number of jobless Americans can no longer even apply for UI benefits, a problem that only serves to compound the harm caused by prolonged unemployment. (A few states even cut off UI benefits before the 26-week mark.)
So when journalists and politicians note that the unemployment rate has nearly reached its pre-recession level, keep in mind that unemployment today is far different than it was in 2007. Even if unemployment had fallen to 5.0 percent last month, it would still inflict far more harm on society, given that unemployment is an even more miserable experience now than the same level would have implied in 2007.
