Long-term unemployed Americans are demographically similar to those who are jobless for a shorter time and should therefore be included when measuring labor- market slack, according to Federal Reserve Bank of New York research.
Gender, race, education and industry differ only slightly among the two groups of unemployed, New York Fed researchers including Aysegul Sahin, assistant vice president of the bank’s research and statistics group, wrote in the first of a three-part blog series on long-term unemployment.
Those out of work for 27 weeks or more, the long-term unemployed, are more frequently 25 to 54 years old than the shorter-term jobless, indicating they are less likely to drift from the workforce.
“Long-term unemployed workers are not less attached to the labor market than short-term unemployed workers,” the researchers wrote. “If anything, the long-term unemployed group has the largest share of prime-age workers, the age group likely to have the strongest labor force attachment.”
The research rebuts those who say that the short-term unemployment rate, which is back to its pre-recession level, is a more accurate measure of labor market slack because long-term unemployed are less likely to be participating in the job market and therefore exert little pressure on earnings. While payroll gains are on track for their best year since 1999 and the unemployment rate is at a six-year low, an elevated level of long-term unemployed and limited wage growth remain weak spots for the Fed.
Long-term unemployment is among the bleaker measures on Fed Chair Janet Yellen’s labor market dashboard that haven’t yet returned to pre-recession strength. The share of jobless who have been out of work for 27 weeks or longer was 32 percent in October, twice the historical average of 15.2 percent in data going back to 1948.
Underutilization in the labor market is “gradually diminishing,” the Fed officials said in a statement at the conclusion of their two-day meeting last month.
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