Job prospects bleak for millions

Long-term unemployed are struggling to find and keep work, research shows

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For the long-term unemployed, finding a job is hard -- but keeping one may be even harder.

New research tracking people who have been out of work for six months or longer found that 23 percent landed a job within a few months of the study. But a year later, more than a third of that group was unemployed again or out of the labor force altogether.

The findings are the latest in a bleak but growing body of literature suggesting that long-term unemployment has become a trap that is difficult to escape. Economists say that means the long-term unemployed could become a permanent underclass, left behind by the nation's broader economic recovery.

"It's not like when you get back to work, you're safe," said John Fugazzie, who founded Neighbors-Helping-Neighbors, a mentoring group for the jobless, and is amidst his second bout of unemployment since the recession. "The economy is a lot worse than people want to admit."

Several factors are blamed for perpetuating the vicious cycle. Some economists argue that workers' skills deteriorate during long spells of joblessness, making them less employable. Others counter that desperate workers are accepting jobs that are unstable or a poor match for their abilities, often for less money than they were making before.

In a paper for the Brookings Institution, former White House chief economist Alan Krueger looked at data on the long-term unemployed from 2008 to 2013 and documented the incidence of repeat joblessness. In a given month, about 36 percent of those workers were in a job 15 months later, according to his analysis. But a closer look at the data revealed something even more disheartening: Only 11 percent were in steady, full-time jobs.

"It appears that reemployment does not fully reset the clock for the long-term unemployed," Mr. Krueger, now at Princeton University, wrote with two colleagues there.

Roderick Negron is a textbook example. The New Jersey resident had worked at Sony for 23 years before he was laid off in 2011 following the sale of his division. He was out of work for nearly 11 months before getting hired as a consultant for a printing company, at $10,000 less than his previous salary. But he said he was happy just to have a job.

Mr. Negron parlayed that job into what was to be a permanent position at Canon a year later. He was considered one of the success stories at Neighbors-Helping-Neighbors and offered advice to those who were still out of work. Then this month, he got a pink slip from Canon, as his department's sales flagged. Now, he's back at square one. "Once you go through that experience, you're always mindful of the fact that it can happen again," he said. "It brought to light the fragility of employment and the things that you take for granted."

Other economists have demonstrated just how difficult it can be for the long-term unemployed to land a job in the first place. In research for the Federal Reserve Bank of Boston, Northeastern University economist Rand Ghayad sent nearly 5,000 mock applications in response to job postings. He found that résumés showing unemployment lasting more than six months were uniformly rejected -- even when those applications listed significant work experience. In other words, Mr. Ghayad said, companies were more willing to hire people with little experience who were recently unemployed than to hire long-jobless candidates with relevant experience.

Mr. Ghayad said this dynamic creates what he called "the jobless trap," in which those who are unemployed are increasingly likely to stay that way. He places the blame solely on the businesses doing [or not doing] the hiring. "There's no occupation where you lose your skills in one month, between [the] six[th] and seven[th]," he said. "I wouldn't blame the unemployed people for 1 percent of what's happening."

Others worry that the longer workers are unemployed, the less employable they become. The concept is known as "hysteresis" in economic circles, and historically has referred to countries such as Japan that got mired in years of slow growth.

"Good evidence shows that both skill depreciation and stigma effects matter," Heritage Foundation senior analyst James Sherk said. "Workers do become less productive, ... and employers view long-term unemployment as a negative signal of employee quality."

This debate's resolution could have a profound impact on the biggest policy battles in Washington. Congress is fighting over whether to extend unemployment benefits to the long-term jobless. Democrats argue that the payments are needed to tide over workers during a difficult job search, but Republicans say the strengthening recovery is all the help they need.

Meanwhile at the Federal Reserve, Chair Janet Yellen on Wednesday said writing off the long-term jobless would be "premature." In a New York speech, she cited the high rate of long-term unemployment as an argument for keeping the central bank's easy-money policies in place.

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