The Great American Jobs Machine just keeps chugging along.
In July, the labor market blew past economists’ expectations, adding 255,000 new jobs after posting an equally impressive gain of 292,000 in June.
But even though the labor market is producing more than enough jobs to keep up with population growth, and the unemployment rate is sitting below 5%, the August employment situation report wasn’t without its bad news. According to the Labor Department, the number of long-term unemployed—defined as those who have been out of work for 27 weeks or more— actually rose in July by 41,000, to more than 2 million. The following chart shows the trend in long-term unemployment:
As you can see, not only are about as many long-term unemployed today as there were at the worst of the previous recession, there has been much less progress in bringing this number down of late than earlier in the recovery. An even more sobering statistic is that the share of the total unemployed who have been jobless for more than 27 weeks remains over 26%.
These statistics are examples of data that Janet Yellen and the Federal Reserve look at when trying to determine the health of the labor market, and trying to determine whether to raise interest rates. Despite the fact that the unemployment rate is roughly where economists estimate full employment to be, these data show parts of the labor market that are still struggling.
Unfortunately, there’s little reason to believe that this problem will be solved without extraordinary government intervention. As economists Vincent and Carmen Reinhart have shown in their research on financial crises, labor markets take a very long time, longer than 10 years, to recover from these disruptive events. That’s because when workers are thrown out of work for extended periods of time, their skills and overall employability deteriorate, a phenomenon economists call hysteresis.
Phenomena like these may help explain why so many voters are still feeling uneasy about the economy even as the official unemployment rate has returned to the levels we were used to before the crisis.