CBO: US in Longest Stretch of High Unemployment Since Depression

The United States is experiencing the longest stretch of high unemployment since the Great Depression, according to a new study by the Congressional Budget Office.

U.S. unemployment in the United States has exceeded 8 percent since February 2009, making the past three years the longest stretch of high unemployment in this country since the Great Depression, writes CBO Director Douglas Elmendorf on the CBO Director’s Blog site.

Further, the agency projects that the unemployment rate will remain above 8 percent until 2014.

Editor's Note: Economist Warns: 50% unemployment, 90% stock market drop, 100% inflation.

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“The share of unemployed people who have been looking for work for more than six months — referred to as the long-term unemployed — topped 40 percent in December 2009 and has remained above that level ever since,” Elmendorf writes.

Among the major drivers of the current high unemployment rate:

• Weak demand for goods and services, as a result of the recession and its aftermath, which results in weak demand for workers.

• Mismatches between would-be employers’ needs and the skills or location of the unemployed.

• Incentives for people to stay in the labor force and continue searching for work that result from extensions of unemployment insurance benefits.

• The erosion of unemployed workers’ skills and the belief of some employers that people who have been unemployed for a long time would be low-quality workers, a phenomenon sometimes called “stigma.”

The major reason has been weak demand, in the CBO’s view, Elmendorf writes. “However, when aggregate demand ultimately picks up, as it eventually will, so-called structural factors — specifically, employer-employee mismatches, the erosion of skills, and stigma — may continue to keep unemployment and long-term unemployment higher than normal.”

The CBO offered several solutions to the problem, including training programs and, interestingly, cutting back on unemployment insurance programs to encourage workers to return to the workforce.

However, even if enacted, such policies would be unlikely to make dent in the topline number over the next two years, the director wrote.

Official unemployment of 8.3 percent is contested by data supplied by the polling form Gallup. It puts the jobless rate at 9 percent, up from its previous estimate of 8.6 percent. And it predicts things will worsen shortly.

"Gallup's mid-month unemployment reading, based on the 30 days ending Feb. 15, serves as a preliminary estimate of the U.S. government report, and suggests the Bureau of Labor Statistics will likely report on the first Friday of March that its seasonally adjusted unemployment rate increased in February," the firm said when releasing its mid-February numbers.

Editor's Note: Economist Warns: 50% unemployment, 90% stock market drop, 100% inflation.
See the Evidence. Click Here to Watch the Aftershock Survival Summit Now.