Recent reports have indicated a downturn in the U.S. economy. Coupled with fears stemming from the Eurozone debt crisis, they've fueled speculation about "Recession 2013."
In fact, former President Bill Clinton said he thinks we are already in a recession - and that was before the latest U.S. unemployment numbers were released, painting an even gloomier picture.
By now most of you have heard about the awful numbers in the discouraging U.S. jobs report for May, where only 69,000 jobs were added - nowhere near the 150,000 expected.
But what's worse about the U.S. jobs report is the trend of long-term unemployment.
Even though the national unemployment rate has dropped from its October 2009 high of 10.1% to its current level of 8.2%, the long-term unemployment levels have not seen a similar drop.
Without improvement in these numbers, fears regarding another recession will become reality.
Long-term unemployment, measured every six months, reached a peak of 46% of the unemployed population during May 2010.
That number has only fallen to 42.8%, or 5.4 million of the total unemployed, and has risen of late.
Looking at the chart it is easy to see that long-term unemployment is at its highest level in the past thirty years. Going back further, it is actually at its highest level since the Great Depression.
The Department of Labor last week released the amount of initial claims for unemployment filed during the week of June 2.
(Figure 1 Source: Bureau of Labor Statistics)
About 370,000 new claims were filed, a painfully high amount. The following industries filed the most recent claims, and are where most of the long-term unemployed are hunting for work:
Long-term unemployment is a serious condition with permanent scarring effects on the unemployed workers. Physically, mentally, and economically it will be hard for these workers and their families to recover.
Some of these workers may never return to the workforce, further escalating the problem.
"The result is nothing short of a national emergency," economists Dean Baker and Kevin Hassett wrote recently in The New York Times. "Millions of workers have been disconnected from the work force, and possibly even from society. If they are not reconnected, the costs to them and to society will be grim."
Some economists have argued that the unemployment numbers are cyclical; others have argued the problem is structural. If it is structural - meaning there's a disconnect between the jobs being offered and the skill level of job hunters - then U.S. unemployment will not fall much more, even with strong economic growth.
More importantly, if economists still cannot agree on the causes for the historically high unemployment rates, it will be even harder for them to pinpoint any solutions. Lack of a resolution will make "Recession 2013" a reality.
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