Unemployment Rate Drop Is Good News But It's Likely To Rise Again
The surprising drop in the unemployment rate released Friday may seem like good news, but experts expect the rate to rise in the months ahead.
Among the most vulnerable to a prolonged drought of jobs are the long-term unemployed. Research shows that the longer someone is out of a job, the longer it takes to find a new one. Nearly half of the unemployed have been out of work for at least six months. Per the National Employment Law Project:
The average duration of unemployment has hit another record high of 30.2 weeks, with a historic 41.2% of the unemployed remaining out of work for six months or longer. 11.5 million Americans are collecting some form of unemployment insurance. During the most recent previous peak in long term unemployment in 1983, a comparatively low 26% of unemployed workers were out of work for six or more months, and the average duration of unemployment peaked at 21 weeks.
With so many out of work for so long, the group says more action is needed. The executive director, Christine Owens, said:
The continued high rate of long term unemployment reflected in January's jobs report underscores the urgent need for action from Congress to maintain the lifeline of jobless benefits for millions of unemployed workers caught in the undertow of this recession.
While the report has glimmers of relief for workers, the Labor Department today released payroll jobs numbers show that we have lost a staggering 8.4 million jobs. With the jobs hole this deep, Congress and the Administration must bravely stare into the headwinds of budget concerns and continue to fortify the safety net throughout this year.
Any faltering of their support will bring disaster for families, communities and the economy.
This was a bizarrely confounding report. We learned from employers that the employment plunge following the financial crisis, as of March 2009, was 930,000 jobs steeper, and another 433,000 jobs were lost by December.
Yet, despite being in a 1,363,000 larger job hole, the report from households was very positive: unemployment fell from 10.0 to 9.7 with employment up 784,000 from December and those involuntarily working part-time plummeted by 849,000.
Despite all this, I assume the unemployment rate will resume its steady upward growth in the months ahead.
Like Mishel, Goldman Sachs also forecasts a worsening jobs situation: analysts at the most profitable firm in Wall Street history said in December that they expect the unemployment rate to hit 10.75 percent by early 2011, a full percentage point higher than the current rate.
Meanwhile, the Obama administration forecasts a 10 percent average unemployment rate this year, dropping to 9.2 percent in 2011, according to the administration's budget request released earlier this week.
"Unfortunately, even with healthy economic growth there is likely to be an extended period of higher-than-normal unemployment lasting for several years," the administration noted.