Looking and Not Liking
Subject Unemployment
Topic Employment, Unemployment, and Inflation
Key Words Recession, Cyclical Unemployment, Structural Unemployment
News Story

The unemployment rate is defined as the number of people unemployed in relation to the size of the labor force. Usually reported as a single number, the magnitude of the unemployment rate may mask a number of social problems and trends associated with the performance of the labor market. Long-term unemployment, that is, the number of people who are unemployed for 15 weeks or longer, increased 50 percent last year. This growth in long-term unemployment occurred even though the current unemployment rate of 5.9 percent is relatively low compared with similar recessionary periods in the 1980s and 1990s. The Labor Department estimates that 3 million people have been unemployed for 15 weeks or more and about half of those have been unemployed for at least 6 months.

In the 1970s and 1980s, when the aggregate unemployment rate was about 16 percent, the average period of unemployment lasted 10 to 12 weeks. Last month, the Labor Department reported that the average length of unemployment is currently 16.2 weeks. This rate does not include approximately 1 million individuals that have dropped out of the labor force this past year.

Part of the explanation for the rise in the number of long-term unemployed is the aging of the population and globalization. With the aging of the workforce, it becomes increasingly difficult to retrain older workers who are displaced by industry changes. Globalization has caused many firms that provided good jobs for workers with high school degrees to move to other countries. The jobs remaining for these workers, which do not require college degrees, tend to be unskilled and low paying.

Families with one or two members who are unemployed for long periods face financial difficulties. Families start drawing down their regular savings and then, retirement savings, already diminished by the stock market's poor performance during the past year. As the spell of unemployment continues, unemployment benefits may be exhausted and workers may be forced to take a low-paying job out of desperation.

(Updated October 10, 2002)


Define cyclical and structural unemployment.

2. Is long-term unemployment a part of cyclical or structural unemployment?
3. What is the source of information that the Labor Department uses to calculate the monthly unemployment rate?
4. In Europe, unemployment benefits are provided for a longer period of time than in the U.S. Do you think that extending unemployment benefits is beneficial to the economy?
Source David Leonhardt, "Long-Term Jobless Rose by 50 Percent Over the Last Year," The New York Times, September 9, 2002.

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