Long-term Unemployment: What It Is, Causes and Effects

Why 1.7 Million Can't Find Work Even After Looking for 6 Months

After looking for a job for six months, it's hard not to give up. Photo: PeskyMonkey/Getty Images

Definition: Long-term unemployment is when workers are jobless for 27 weeks or more. To be counted as such by the Bureau of Labor Statistics, they must have actively looked during the last four weeks. That means the number of long-term unemployed is probably under-counted. Most people become discouraged and drop out of the labor force after six months.  For more, see Labor Force Participation Rate.

Long-term Unemployment Statistics

In March 2017, there were 1.7 million long-term unemployed. That means 23.4 percent of the unemployed have been looking for work for six months. That's better than the record high of 46 percent in the second quarter of 2010. The number first dropped below two million in May 2015. 

It's not much better than the darkest days of the 1981 recession. At that point, 26 percent of the unemployed were out of work for more than six months. On the other hand, total unemployment was worse than it is today. There was a 10.8 percent overall unemployment rate. In other words, the Great Recession created a higher percent of long-term unemployment.(Source: "Potential Causes and Implications of the Rise in Long-Term Unemployment," The Federal Reserve Bank of Richmond, September 2011.)

Causes of Long-term Unemployment

The two causes of long-term unemployment are cyclical unemployment and structural unemployment.

Cyclical unemployment is usually itself caused by a recession. Structural unemployment occurs when workers' skills no longer meet the needs of the job market.

Long-term, cyclical and structural unemployment feed off of each other. A recession causes a massive rise in cyclical unemployment. Those that can't find jobs become long-term unemployed.

If out of work long enough, their skills become outdated. In time, this contributes to structural unemployment. They have less money to spend, reducing consumer demand. This further slows economic growth, leading to more cyclical unemployment.

Many say there are three other reasons for long-term unemployment: welfare, unemployment benefits, and unions. Government assistance programs require that recipients look for work. That inflates unemployment statistics by 0.5 percent - 0.8 percent because they may not be actively looking and really shouldn't be considered part of the labor force. Benefits may encourage people to hold out for better-paying jobs, further extending unemployment.

Unionization creates classical unemployment by forcing companies to offer higher wages than they normally would. These companies must lay off workers to maintain budget and profit goals. These workers may only have skills for this industry and may be unwilling to take lower wage jobs. That can result in structural, and ultimately long-term, unemployment. (Source: Lawrence H. Summers, "Unemployment," The Concise Encyclopedia of Economics, 2008, Library of Economics and Liberty.)

Effects of Long-term Unemployment

Only 10 percent of the long-term unemployed find a job each month, according to a report by the San Francisco Federal Reserve.

That is worse than the 30 percent per month of the short-term unemployed who are successful.

The situation is not hopeless. The study also found that half of the long-term unemployed will find a job in six months, and 75 percent will do so within a year. Even those haden't found a job in 18 months will eventually find something if they keep looking. The San Francisco Fed found that the chances of finding a job didn't decline for those unemployed for that long. (Source: "Long Term Unemployment," CNN Money, June 14, 2012.)

Naturally, being unemployed for six months to a year will strain personal finances. However, a Pew Research study found the recession affected the long-term unemployed worse than others in the areas of personal relationships, career plans, and self-confidence. Specifically, the long-term unemployed reported:

  • More than half (56 percent) saw their income decline, compared to 42 percent of the short-term unemployed and 26 percent of those who kept their job.
  • Nearly half (46 percent) experienced strained family relations, compared with 39 percent of those who weren't unemployed as long, and 43 percent lost close friendships.
  • Almost one in four (38 percent) lost self-respect, and 24 percent sought professional help for depression, compared with 29 percent and 10 percent of the short-term unemployed.
  • The recession has had a "big impact" on their ability to achieve career goals for 43 percent of them, compared to 28 percent of their short-term peers.
  • More than 70 percent say they changed careers. Nearly a third (29 percent) became underemployed, with lower pay and benefits than the one they had. Not surprisingly, they became very pessimistic about their chances of finding a good job. Only 16 percent of the short-term unemployed were worse off. (Source: Rich Morin and Rakesh Kochhar, "The Impact of Long-Term Unemployment," Pew Research Center, July 22, 2010.)

As an example of loss of skills, a Swedish study found that the long-term unemployed began losing their ability to read. On average, a person who had been unemployed for a year lost 5 percent on reading comprehension test scores. (Source: Binyamin Appelbaum, "The Enduring Consequences of Unemployment," Economix, March 28, 2012.)

How Long-term Unemployment Benefits Extensions Help

Federal unemployment benefits extensions assisted the long-term unemployed in their job search efforts.  Congress approved these extensions in the 2009 American Recovery and Reinvestment Act. They were reauthorized every year through 2013. 

They provided the long-term unemployed with up to 99 weeks of unemployment checks. That was a great boost to help support them until they can find decent jobs. Without these extensions, they would have to take any job they could, certainly leading to underemployment. This might preclude them from ever catching up, as their skills became more outdated.

However, unemployment benefits only help those who were laid off. Some employers fire workers for cause, or ask workers to resign in return for a severance package, so they don't have to pay benefits. Workers who quit, part-time workers, the self-employed, and students or mothers just entering the workforce also aren't eligible for benefits.

Not all of those eligible for benefits will receive the entire 99 weeks. They've got to live in a state that meets a minimum unemployment rate.

How to Calculate the Long-term Unemployment Rate

Fortunately, the long-term unemployment rate is easy to calculate because the BLS breaks out the statistics for you each month in the Employment Situation Summary. The number of people who have been unemployed for 27 weeks or more is given in Table A-12. The BLS conveniently calculates what percent they make up of the total unemployed. This table gives you the data for the past three months, seasonally adjusted. It also allows you to compare the past two months, and year-over-year, not seasonally adjusted.