Is Higher Unemployment the Hidden Cost of Extended Unemployment Benefits?
In December, the headline unemployment rate fell to 6.7 percent, its lowest level since the crisis. At 10.3 million, the total number of unemployed persons in the United States also hit a post-crisis low, down 15.6 percent from December 2012. Even U-6 unemployment, a measure that includes marginally attached workers such as those working part-time for economic reasons, has been on the decline, although at 13.1 percent the rate is still elevated.
This is all well and good, but there’s more to the picture than optimists may suggest. Just 74,000 payrolls were added in December, according to the Bureau of Labor Statistics, a miserably low figure and well below the 200,000 expected by economists. Meanwhile, the labor force participation rate declined by 0.2 percentage points to 62.8 percent, well below pre-crisis levels of about 66 percent. The number of unemployed people declined by 490,000 people, but few of them were actually put on payrolls.
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Perhaps most troubling, though, is that the average duration of unemployment remains enormously high at 37.1 weeks, about twice what it was before the financial crisis. The percentage of the total unemployed who have been without work for 27 weeks or more, placing them under the umbrella of the long-term unemployed, is 37.6 percent, or nearly 3.9 million Americans.