Monday, January 18, 2010

Some US jobs may be permanently lost as longer-term unemployment class grows

In the last two years following the economic downturn, the economy has seen a loss of 7.2 million jobs, which brought the jobless rate from 5% to 10%, according to the Department of Labor. (Of course, it’s pretty much understood that the 10% does not take into account unemployed part-timers, contract workers, small business owners, recent graduates who can’t find jobs and older workers “encouraged” to retire early.) While some jobs will eventually come back, the permanent loss of others may keep the labor market from fully recovering for a long time to come.

Falling under the category of “No Kidding,” the doors to many credit market, housing and finance jobs made possible by the boom have closed. Other reasons for jobs that have permanently disappeared, according to a recent Wall Street Journal article, include: natural attrition due to technological and communications advancements, competition from low-wage countries like China, and an opportunity for employers to lay off workers who performed jobs that are no longer as critical as they once were.

In contrast to earlier recessions prior to the 1990s, the article noted, jobs rebounded quickly because losses were considered essentially temporary, with employees having the implicit expectation that they would be hired back once the worst was over. This time around, however, jobs have been much slower to recover.

And speaking of bad trends, here’s another depressing statistic: the number of job openings relative to the unemployed population were at an all-time record low in November. According to the US Bureau of Labor Statistics, 22.9 percent of the unemployed had been out of work for at least 27 weeks as of December 2008. One year later, the number of those out of work rose to 39.8 percent. The result is what one New York Times blogger refers to as a “growing underclass” of the longer-term unemployed: months after unemployment insurance benefits have run out, a growing segment of the unemployed is taking longer and longer to find work.

Will it be the case that the longer they remain unemployed, the less likely it may be that they eventually find work? One can only hope that once the health care bill is passed, Congress and the Obama Administration will finally turn its sights on Main Street.

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