Long-term unemployment has begun to wane as the U.S. job market recovers and will probably continue to fall, the Federal Reserve Bank of San Francisco found.
“While unemployment duration remains near historical highs, the characteristics of the long-term unemployed and their recent job-finding rates suggest that a sustained cyclical recovery will largely eliminate long-term joblessness,” according to paper released Monday by the San Francisco Fed. “The incidence of long-term unemployment has declined over the past few years.”
Fed officials have been closely following the ranks of those who have been out of work for more than six months, concerned that such workers face declining job prospects the longer they stay unemployed. The central bank has been buying $85 billion per month in bonds to accelerate a rebounding labor market that Fed Chairman Ben Bernanke says is not improving fast enough.
“Very extended periods of unemployment can interfere with the workings at the labor market,” Bernanke said in a press conference Dec. 12 after he and his colleagues voted to expand a third round of quantitative easing. “If the Fed were not to address a large unemployment problem for a long time, it might, in fact, have some influence in the long-term unemployment rate.”
The San Francisco Fed paper reviews the percentage of people who are long-term unemployed instead of the average amount of time people remain unemployed, which is a more commonly used gauge of long-term joblessness.
While unemployment duration — at 35.3 weeks in January — has remained “very high,” the ratio of those who have been jobless for more than six months has “fallen significantly since early 2010,” according to Rob Valletta, a research adviser at the San Francisco Fed who wrote the paper.
Valletta also compared the rates at which these workers found work in the current recovery to those in the past, finding few differences.
“That finding implies that the current elevated level of long-term unemployment is likely to disappear over time,” he said.
© Copyright 2023 Bloomberg News. All rights reserved.