Janet Yellin is the Vice Chairman of the Federal Reserve System’s Board of Governors, a government agency. She recently gave a speech on how bad the unemployment situation has been, is, and will remain. But she ended on a note of optimism. It was an optimism that was not supported anywhere in her speech.
Let me close with some words of encouragement. The job market is improving. The progress has been too slow, but there is progress. My colleagues and I at the Federal Reserve are well aware of the difficulties faced by workers in this slow recovery, and we’re actively engaged in continuing efforts to promote a stronger economy, more jobs, and better conditions for all workers.
In short, to quote President Clinton she feels your pain. When you have a tenured job with the U.S. government, there is not much pain to feel.
How bad is the job market? Really bad, she said. This is over five years after the recession started in December 2007.
The unemployment rate now stands at 7.9 percent. To put this number in perspective, while that’s a big improvement from the 10 percent reached in late 2009, it is now higher than unemployment ever got in the 24 years before the Great Recession. Moreover, the government’s current estimate of 12 million unemployed doesn’t include 800,000 discouraged workers who say they have given up looking for work. And, as exhibit 6 shows, 8 million people, or 5.6 percent of the workforce, say they are working part time even though they would prefer a full-time job. A broader measure of underemployment that includes these and other potential workers stands at 14.4 percent.
That figure – 14.4% – is a disaster. She knows this.
The effects of the recession and the subsequent slow recovery have been harshest on some of the most vulnerable Americans. The poverty rate has risen sharply since the onset of the recession, after a decade in which it had been relatively stable, and stands at 15 percent of the population, significantly above the average of the past three decades.
Worse, the jobless stay jobless, month after month.
Another gauge of the effect that this slow recovery has had on workers is how long it is taking to find a job. At its worst point in the 1980s, the median length of unemployment for those looking for a job was 12 weeks, but the median since the Great Recession has averaged 20 weeks and now stands at 16 weeks. Three million Americans have been looking for work for one year or more; that’s one-fourth of all unemployed workers, which is down from 2011’s peak but far larger than was seen before the Great Recession.
These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families. Longer spells of unemployment raise the risk of homelessness and have been a factor contributing to the foreclosure crisis. When you’re unemployed for six months or a year, it is hard to qualify for a lease, so even the option of relocating to find a job is often off the table. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children.
She did not say what should be obvious: Keynesian economics is not working. Neither are millions of Americans.
Long-term unemployment is also a great concern because it has the potential to itself become a headwind restraining the economy. Individuals out of work for an extended period can become less employable as they lose the specific skills acquired in their previous jobs and also lose the habits needed to hold down any job. Those out of work for a long time also tend to lose touch with former co-workers in their previous industry or occupation – contacts that can often help an unemployed worker find a job. Long-term unemployment can make any worker progressively less employable, even after the economy strengthens.
She droned on and on, just as Berkanke does. She offered no evidence of a reversal. She ended on a note of gold-plated optimism. But if you read her speech, you see no evidence to support her hope.