Figure 1 displays three of these measures for the period January 1967 to October 2002, plotted along with the unemployment rate as a standard indicator of the cyclical status of the labor market. Census Bureau and Bureau of Labor Statistics (BLS). Such measures can reduce the hardship associated with long spells but may have the adverse side effect of lengthening unemployment by reducing the costs of job search.Ī variety of different measures of unemployment duration at the national level are available on a monthly basis, each based on data from the monthly household survey administered by the U.S. Policy responses to recessionary unemployment therefore tend to focus on long spells-for example, in March 2002 Congress extended unemployment insurance benefits from 26 weeks to 39 weeks (up to 52 weeks in states with high unemployment rates). As such, rising unemployment duration during economic downturns can have adverse consequences for household spending and financial solvency and may act to stifle the recovery. Although households can rely on savings to tide them over during short spells of unemployment, their ability to do so declines as unemployment spells lengthen. As recessions persist, rising unemployment rates are accompanied by rising unemployment durations. No matter what duration structure characterizes unemployment under typical labor market conditions, however, the deterioration in labor market conditions that occurs during a recession implies a cyclical increase in the incidence and share of long spells of unemployment. Of course, the truth about unemployment lies somewhere in between the extremes of short and long durations. Thus, the two views pose the extremes of a well-functioning market for matching workers and employers in which the burden of unemployment is widely dispersed and a situation in which a relatively small number of workers bear the burden of a persistent shortage of appropriate jobs. In contrast, advocates of the long view argued that the pool of unemployed typically is dominated by individuals who experience relatively long spells of unemployment (three months or more) and are best described as “involuntarily” unemployed, often through permanent job loss. This view generally is consistent with voluntary search activity by unemployed individuals and employer reliance on temporary layoffs for cyclical employment adjustments. The short view emphasized the dynamic nature of unemployment, focusing on job turnover and implying that the pool of unemployed typically is dominated by a large number of individuals who experience relatively short spells of unemployment (a month or two at most). is best described as “long” or “short.” This distinction is critically important for assessing the economic efficiency and equity aspects of unemployment. In the 1970s and 1980s, scholars and policymakers debated whether the typical unemployment spell in the U.S. Unemployment duration refers to the amount of time that an individual remains unemployed. Underlying this may be the improved labor market conditions of the 1990s expansion, which acted to offset a long-term trend toward rising duration of unemployment. Reliable measures of the expected length of unemployment spells indicate that although duration increased more than expected in recent months, it has not been especially long during the recent economic downturn. In this Economic Letter, I discuss the concept of unemployment duration, the various measures available, and the evidence regarding the pattern of unemployment duration in the current cycle compared to past cycles. Persistent labor market weakness implies that the amount of time spent unemployed (unemployment duration) is likely to increase, which in turn has important implications for household well-being. Thus far in 2002, payroll employment has been flat to down nationwide, and the unemployment rate has stayed stubbornly close to 6%, raising the specter of a “jobless recovery” from the 2001 recession. Between late 2000 and early 2002, the national unemployment rate increased by about 2 percentage points, from 3.9% to about 6% this represents about 2.8 million additional individuals looking for work. Unemployment, however, remains a problem. The recession that began in early 2001 probably has ended, as national output grew moderately during the first three quarters of 2002.
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