Unemployment duration: 60-year high

Dan Hamermesh is currently visiting BYU as an invited seminar speaker. I was showing him my picture of the normalized peak plot of employment in the last 14 recessions, and he told me about another labor fact from this recession that astounded me. Look at the picture below of average duration of unemployment in the U.S. since 1947. The average unemployment duration for everyone who said they were unemployed in August 2009 was 25 weeks (nearly 6 months). Compare that to the average of about 15 weeks between 1976 and 1992. This is the 60-year record in the U.S.

As we talked about unemployment today in my intermediate macroeconomics class, we tried to come up with some reasons why average unemployment duration has been steadily increasing since 1970 even though job search information products have improved (e.g., the internet generally, and Monster.com specifically). One hypothesis is that specialization has actually reduced the set of jobs that a particular person can do. A related idea is that increased education has increased the period that people are willing to search in order to find a "good" job (increased reservation wage). Of course we have had increased social programs, like unemployment insurance, during the last 35 years. But that does not explain the steady rise in average duration.

UNRATE2009-09.pngThe chart above shows the unemployment rate in the U.S. up to August 2009. But look at the one below that shows the number of Americans unemployed for more than 27 weeks. This recession really stands apart for the last 60 years with about 5 million people unemployed for over 27 weeks in August 2009. Compare that to the next highest level of about 3 million unemployed for over 27 weeks in the early 1980s. If the U.S. is going to implement any unemployment policy, it should be targeted at these long-term unemployed that seem to be a direct result of the severity of this recession.



To me, the most logical (as well as anecdotally relevant) explanation is the increased reservation wage. I, myself fell into this category after leaving UT. I really wanted to pursue a health economist position and I had this very cute agent based modeling with health behaviors. I remember while searching for a job, Suzy (my wife) said to me "Dammit, Ben, you're never going to find an Agent-Based Modeling job!"

Sure enough, I found one two weeks later. I'm still working on agent based models with a health bent.

Please say hi to Dan for me and give him my best.

I favor the view that this is the result of increased specialization and globalization. I am unemployed for the first time in 25 years after receiving a BS in Computer Sci. What strikes me is that employers can no select candidates that fit the exact skillset they need. This includes test suites, development tools, etc... in the "old" days, everyone used a text editor, debugging was accomplished via printing trace messages, and the whole process was slower. I imagine that the IT industry is not the only one that has undergone this change toward a more specialized workforce. It's getting harder to be the square peg in a round hole.

interesting graphs....