Congress to extend jobless benefits, but employment crisis continues

Although Congress is on the verge of passing another emergency extension of jobless benefits this week, concern continues to grow over how long it could take to dig the country out of its current unemployment crisis.

The U.S. has weathered recessions before, but none in decades have included this many Americans joining the ranks of the "long-term unemployed" (individuals out of work for more than six months). That number is at its highest level "since the government began keeping the statistic in 1948," according to government statistics. The New York Times reports that the latest figures indicate that 46 percent of the 14.6 million Americans who are unemployed have been out of work for more than six months.

If those statistics weren't enough to illustrate the enormity of the long-term unemployment crisis, check out this chart below from the Department of Labor:

So why aren't people able to return to the workforce? Economists and analysts say there are currently "five job seekers for every job." There simply aren't jobs out there to be filled. Since the current recession began in December 2007, it's estimated that nearly 8 million jobs have been lost. As long as the economy is suffering, employers aren't increasing their staffs and are leaving empty positions vacant.

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So how do we get more jobs? Politicians and economists are busy debating the question, but most agree that until employers have incentives to hire, the jobless problem can't be solved quickly.

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Many Democrats say more stimulus is required to provide those incentives. They've pushed for the jobless benefit extension because they think it will stimulate the economy and in turn, stimulate employment. "There is no better stimulus than unemployment benefits, as this money quickly flows from those who need help into local economies," Labor Secretary Hilda Solis wrote in a post this month for AOLNews.

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But that suggestion irks many, including most Republicans in Congress and some economists: "Not only will increased unemployment benefits not stimulate the economy, they will at the same time lower the incentives for people to work by reducing the amount people are paid for working and increasing the amount people are paid for not working," economist Arthur B. Laffer wrote for the Wall Street Journal.

But statistics show that many unemployed people, including those not receiving benefits, are simply giving up their job searches. One requirement for receiving unemployment benefits is that an individual actively search for work, yet people are continuing to forgo benefits to drop out of the labor market.

The unemployed who stop looking for work become classified as "discouraged," and the number of discouraged workers continues to grow. And these discouraged workers are an added twist to the nation's unemployment problem: Discouraged workers are no longer considered unemployed, which is part of why the 9.5 percent rate of unemployment understates our current crisis. It's also one of the reasons the unemployment rate dropped in June from 9.7 to 9.5 percent. If you add the 1.2 million "discouraged" workers to the 14.6 million unemployed, you have 15.8 million out-of-work Americans.

So when will it end? Estimates vary, but the Federal Reserve says that unless job growth rates improve, it will take five years for the unemployment rate to return to pre-crisis levels.

(Graph via The Atlantic)

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