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Key Workforce Challenge: Persistent Unemployment
by Nick Beleiciks, Jessica Nelson
Published Mar-26-2012

 
The number of unemployed Oregonians is slowly falling and the unemployment rate is improving. Despite the improvement, persistent unemployment is one of the biggest challenges facing the workforce. Oregon's unemployment rate is still higher than it's been in a generation and there are more people unemployed than during any previous recession.

Unlike previous recessions, job growth has not been fast enough during this recovery to get most of the people who lost their jobs back to work. The lack of available jobs is leading to longer spells of unemployment, and the longer a person has been looking for work, the harder it is for them to find a job. In 2011, 41 percent of unemployed Oregonians had been out of work for more than six months. Each month a person remains unemployed increases their odds of completely dropping out the labor market. Keeping the long-term unemployed engaged in the labor force until they can get back to work is one of the key challenges facing Oregon.

"Long-Term Unemployed" Usually Means Six Months or More
 
To be considered unemployed, a person must be without job, be available to work, and be actively seeking employment. Those who fit that description for 27 weeks or more (at least six months) are considered to be long-term unemployed. There is nothing special about the 27 week switch from short-term to long-term. The challenges faced by those who have been unemployed 26 weeks are no different than those who have been unemployed 27 weeks. It's simply one of the cutoffs in the available data.

People without a paying job and not actively looking for work are not in the labor force and not considered unemployed in these statistics. Typical examples include retirees, homemakers, and students. The long-term unemployed discussed in this article are those without jobs who have been actively looking for work for at least six months.

The Average Unemployment Spell is 10 Months
 
The average time unemployed Oregonians were without a job more than tripled from a little more than three months in 2007 to nearly 10 months in 2011, about the same average duration as the nation. Rising unemployment means more people are competing for available jobs, lengthening the average time it takes people to find work.

There is a bit of a time lag from increases in unemployment to increases in average lengths of unemployment. Graph 1 shows the average duration of unemployment in Oregon continued to lengthen in 2010 and 2011 while the total number of unemployed was falling. Part of this is because it takes time to bring the average duration up. Another reason is that the share of all unemployed who were unemployed for longer than six months grew dramatically following the recession. These factors cause average duration of unemployment to continue to rise even while unemployment is falling.

Graph 1
Number of unemployed Oregonians average duration of unemployment
Forty-One Percent of Unemployed are Long-Term
 
An average of 188,400 Oregonians were unemployed in 2011, of which 41 percent had been unemployed at least six months. That was down 3 percentage points from 2010, but still disturbingly high compared with 2007 when 98,200 were unemployed and just 12 percent were long-term.

Back in 2007, 40 percent of the unemployed had been looking for a job for less than five weeks. This very short-term unemployment is around even when jobs are plentiful as people enter the labor market, quit jobs, or are laid off. The share unemployed five weeks or less dropped to just 21 percent of the total by 2011, but the number of short-term unemployed was about where it was in 2007 at more than 39,000 (Table 1). That means the level of short-term unemployment is near normal again.

The number of Oregonians who have been unemployed for six months or more grew from an average of 12,100 in 2007 to 61,800 in 2009 when the total number of unemployed was at its highest. There were 78,600 long-term unemployed Oregonians in 2011, six and a half times the number during 2007. Despite the recent improvements in short-term unemployment, long-term unemployment remains a persistent challenge for Oregon's workforce.

Table 1
Number of Unemployed in Oregon by Duration
(2007, 2009, and 2011 Annual Averages)
Length Unemployed 2007 2009 2011
Less Than 5 Weeks 39,100 52,800 39,500
5 to 14 Weeks 34,200 64,100 42,400
15 Weeks to 6 Months 12,800 46,200 27,900
6 Months - 1 Year 6,500 32,500 21,600
1 Year or More 5,600 29,300 57,000
Total Unemployed 98,200 224,900 188,400
Source: Bureau of Labor Statistics, Current Population Survey
Graph 2
Distribution of unemployed Oregonians by duration of unemployment
The Unemployed Can Improve Their Chances for Getting Interviews
 
Anecdotal evidence suggests that some employers would rather hire someone who is currently employed or has been unemployed for only a short time than hire someone who has been out of work for a long time. If true, the group of unemployed is suffering from a "first-in, last-out" dynamic, which helps explain the growing average length of unemployment spells. These employers will continue to hire from the pool of newly unemployed until they no longer can find qualified workers. Employers will start hiring from the pool of long-term unemployed once they run out of qualified applicants among the short-term unemployed.

Employers could be using length of unemployment to filter out many of the applications they receive for each vacancy, which saves them time and work during the hiring process. Some employers may have a bias against hiring the long-term unemployed. Common justifications for not hiring the long-term unemployed include the thought that the unemployed:

  • Have skills that have become stale
  • Lack interview skills
  • Have a bad attitude
  • Lack soft skills
  • Or were not the "cream of the crop" to begin with

Job seekers need to fight these biases in order to be hired. Employers say they will still hire workers who are unemployed if they have the skill set to fill the position, have a reasonable reason as to why they were unemployed, and they were doing something productive while not working (such as volunteering, attending school, or homemaking). Job seekers need to note these activities on their resumes in order to land an interview in the first place.

Some employers say up front in their vacancy advertisements that they will not hire someone who is unemployed. That practice has caught the attention of policy makers at the state and national levels.

The Oregon legislature recently passed a law that prohibits employers from advertising job vacancies that include current employment as a qualification for the job. It also specifically prohibits employers from publishing that they will not consider applications from people who are currently unemployed, or similarly, that they will only consider applications from people who are currently employed.

Some Unemployed Become Discouraged and Quit Looking
 
People who have been unemployed for a long time may begin to feel that there are simply no jobs out there, or at least no jobs that they are qualified for. Not surprisingly, this will cause some people to quit looking for work. These discouraged workers are not considered unemployed because they are not actively looking for work. They have left the labor force and are no longer included in the unemployment rate.

Oregon had an average of 9,800 discouraged workers during 2011, individuals who had looked for work sometime within in the last 12 months, but not within the last month. The number of discouraged workers was down from an average of 11,300 in 2010, but it was nearly triple the 3,300 discouraged workers in 2007. Compared with the 188,000 Oregonians who were unemployed and still looking for work, the number of discouraged workers seems small. But the lost potential output of discouraged workers hurts the economy and the psychological impact on discouraged workers can be devastating.

An indicator of the labor market, called U-4, measures the unemployed and discouraged workers together as a share of the labor force plus discouraged workers. According to the Bureau of Labor Statistics, Oregon's U-4 measure averaged 9.8 percent in 2011 and was similar to the national U-4 of 9.5 percent. Elevated levels of discouraged workers illustrate a weak job market, but Oregon does not seem to have a larger share of discouraged workers than the nation.

A measure of labor underutilization that gets a lot of attention is the U-6, which is a measure of the unemployed, marginally attached workers (including discouraged workers), and people working part-time for economic reasons. Oregon's U-6 averaged 17.8 percent in 2011, higher than the national average of 15.9 percent. The bulk of U-6 consists of unemployed people looking for work or people who are employed part-time but want to be working full time. It's the part-time workers who make up most of the difference between Oregon's U-6 and the national U-6. Discouraged workers are just 0.7 percentage point of Oregon's 17.8 percent U-6 number.

One Out of Five Leaves the Labor Force Each Month
 
One of the challenges of long-term unemployment is that people may not remain engaged in the labor force long enough to find a job. National figures show that 19 percent of people who have been unemployed for 27 weeks or longer will leave the labor force each month without finding a job. That's twice as many as the 10 percent of long-term unemployed who become employed each month.

About the same share (21%) of the short-term unemployed (less than five weeks) will leave the labor force each month without finding a job. However, the short-term unemployed are three times as likely to find a job, with 30 percent finding a job every month. Comparing the odds of becoming employed among the short-term group with the odds of the long-term unemployed becoming employed, according to the Bureau of Labor Statistics, provides evidence that the likelihood of becoming employed decreases the longer one is unemployed.

Other Key Workforce Challenges
 
While persistent unemployment is certainly one of the big challenges facing the workforce, it's not the only one. This article is the first in a series of Key Workforce Challenges facing Oregon. Future issues of Oregon Labor Trends will feature an expanded overview of each challenge. The remaining workforce challenges that will be explored are:

  • Structural changes in some industries
  • Slow employment growth
  • Businesses struggling to find skilled workers
  • Connecting training to jobs
  • Younger workers damaged by recession
  • Aging workers and looming retirements
  • Special challenges faced by rural areas