Long-Term Unemployment Rises Toward Historic Peak

Recruiters can play a role by combating negative stigma about joblessness

Roy Maurer By Roy Maurer February 18, 2021
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forlorn man at home

​Long-term unemployment continues to mount one year after the coronavirus pandemic was declared a public health emergency in the United States.

While over 12 million jobs have returned since the stark labor market reaction to the health crisis in April 2020, over 4 million people actively looking for employment have been out of work for at least six months—categorized as long-term unemployment by the Bureau of Labor Statistics (BLS).

People experiencing long-term unemployment make up nearly 40 percent of the over 10 million people counted as unemployed in the U.S., approaching the record set in the aftermath of the Great Recession when nearly 46 percent of unemployed individuals had been out of work for at least six months.

Long-term unemployment has been increasing each month since April 2020, but the largest spikes have come since late last summer, shooting up from 1.6 million in August 2020.

"Long-term joblessness is metastasizing," said AnnElizabeth Konkel, an economist at the Indeed Hiring Lab. "When combining [the number of people enrolled in extended unemployment aid programs], the figure … is by the far the highest we have seen at any point during this crisis," she said. "Long-term joblessness is a very real challenge for the recovery."

Based on pre-pandemic data, the long-term unemployment rate in a relatively healthy economy sits at around 20 percent, said Elise Gould, senior economist at the Economic Policy Institute in Washington, D.C.

Not Your Typical Recession

Expanding long-term joblessness is a factor of an incomplete recovery, said Nick Bunker, an economist and head of research, North America at the Indeed Hiring Lab. The economy never fully returned to full capacity, and many states reimposed safety restrictions leading into the 2020 holiday season.

"It's not only a weak labor market, but an uneven recovery," Bunker said. "Sectors of the economy can't be fully open right now given the public health situation, leading to a loss of job opportunities for many who lost their jobs earlier in the pandemic."

BLS data show over half of those who have been out of work long term come from a few sectors, such as leisure and hospitality, health services and retail.

"Long-term unemployment is likely to be highly concentrated in the industries that have been hit hardest by the pandemic, like leisure and hospitality," Bunker said. "A large percentage of the long-term unemployed were placed on temporary layoff early in the crisis. People in those hard-hit industries were and are holding out hope that they could return to their old job. Maybe they still have a relationship with their employer, and maybe they can return to work when the industry they used to work in reopens."

Lower-wage workers like servers and bartenders from the hospitality and retail industries make up a large share of the long-term unemployed, but professionals in management, marketing and sales from the corporate headquarters of travel, hospitality and retail employers were also laid off in 2020 and remain unemployed.

The largest share of people experiencing long-term unemployment by age is among 25-34-year-olds. "Unemployment is hurting young people more because of the kinds of jobs younger people have in sectors significantly impacted by the pandemic," Gould said. 

Bunker noted that there are even more people who have given up on finding work not counted in the official estimate. "There are people out there going through the hardship of long-term joblessness who are not showing up in these numbers," he said.

Economists fear that ongoing weak labor market growth will make finding work more challenging for people experiencing long-term unemployment. Research has shown that the longer someone is out of a job, the more difficult it becomes to re-enter the labor force. Employers may hold a negative bias toward a significant gap in a job seeker's employment, and workers' skills may start to atrophy. People experiencing long-term joblessness are also more pessimistic about finding jobs, surveys show.

"In addition to the stigma attached to the long-term unemployed, sometimes applicants may find it harder to find a job that offers the same level of compensation they are looking for, or one that fits their skillset," Bunker said.

Gould added that evidence from the Great Recession and its aftermath indicates that long-term joblessness can have a large impact on a person's future career opportunities and earnings for many years to come.

But she feels that this recovery—once it gets going—could be different. "It's widely understood that people are out of the labor force for no fault of their own," she said. "I don't think they will face the same kind of discrimination the long-term unemployed typically face when they try to re-enter the labor market."

Bunker said HR should work toward "not necessarily viewing a period of long-term unemployment as a sign that the person can't do a job. Recruiters should understand that there could be broader circumstances, like the situation we see now that makes it harder for a person to find work."

Employers should also continue to provide work flexibility and offer paid leave to make it easier for people who are unemployed to come back to work and manage the demands brought on by the pandemic, Gould said.  

Relief on the Way

Congress is debating President Joe Biden's $1.9 trillion stimulus plan providing financial support for people who are unemployed. The package includes a $400 weekly government supplement to state unemployment benefits through September and extensions of federal unemployment programs for those who exhausted their regular state unemployment benefits as well as for those who aren't traditionally eligible for benefits, including freelancers, gig workers and the self-employed.

"Many people have already exhausted their benefits," Gould said. "If we let them expire in March [the programs are slated to expire March 14], it's going to be a real problem for many people, especially low-wage workers, who don't have savings to be financially secure."

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