This Might Be About As Good As It Gets
The jobs market might be about as good as it gets right now.
That sounds crazy, with almost 10 million Americans unemployed and an unemployment rate of 6.3%, still well above normal. And the economy could still grow for years without breaking any precedents.
But dig into the characteristics of the unemployed, and there's an important trend that shows the jobs market is actually pretty strong already.
The short-term unemployment rate, measuring the percentage of the labor force that's been out of work for fewer than 14 weeks, is currently about 3%. That's near the lowest it's been in half a century. In fact, we went more than three decades, from 1968 to 1999, without short-term unemployment ever becoming as low as it is today:
If you lose your job today, your odds of finding a new job in the next month or two are about as good as they've ever been. Maybe you'll take a pay cut, or have to move, but there's a good chance you'll find work. Short-term unemployment is lower today than it was for almost all of the 1990s, which we consider one of the most prosperous decades in history.
There aren't many periods in history where short-term unemployment dropped much lower than it is today. Unemployment has a natural floor -- if it gets too low, inflation rises, the Fed raises interest rates, the economy slows, and unemployment goes back up. It's hard to know where that floor is, or if it's entirely tied to short-term unemployment. But if history is any guide, we're near it.
So, if things are so good, why is overall unemployment still so high?
Long-term unemployment -- those out of work for more than six months -- has come way down, but it's still incredibly high historically:
The longer you remain unemployed, the harder it is to regain employment. People lose skills, lose contacts, become depressed, and look like damaged goods in the eyes of recruiters. According to the Council of Economic Advisors, those unemployed for less than five weeks have a 31% chance of getting a job in the next month. At 27 weeks of unemployment, it's 12%. After a year out of work, it's just 9%.
A lot of the long-term unemployment won't ever recover. According to Princeton economist Alan Krueger, only 22% of those who fell into long-term unemployment in 2008 had steady, full-time jobs by the first half of 2013. Another one-third stopped looking for work, and just under a third were working part time. Less than 15% were actively looking for work. Every day this continues, it gets worse.
So, short-term unemployment is great, and maybe about as low as it will get. And those stuck in long-term unemployment are increasingly, day by day, less likely to ever recover. Put those two together, and the overall jobs market right now might be about as good as it gets.
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