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The number of long-term unemployed fell by 136,000 in November and has continued on a downward trend since early 2021 as the economy and labor market recovered.
However, the decline was the smallest since April, when long-term unemployment fell by 35,000 people.
Long-term unemployment is a period of unemployment that lasts longer than six months. It is a financially precarious time for individuals who are then usually no longer entitled to unemployment benefits. It can also cause permanent damage, such as lower future wages or more difficult job search.
The number of long-term unemployed may decrease for “good” reasons (job search) or “bad” reasons (people who are discouraged by job prospects and stop looking for a job).
There is evidence that November’s decline had “good” reasons, and positive development, said Nick Bunker, North American economic research director at Indeed Hiring Lab.
The workforce grew, as did the proportion of employed Americans in the total population, according to the November jobs report published Friday. Both suggest that more people have found jobs in the past month, Bunker said.
The decline in unemployment was also broad-based.
Confusing job report
By and large, the November job report was confusing for economists.
On the one hand, there have been many notable developments.
The US unemployment rate fell to 4.2%, its lowest level since February 2020 when it was 3.5%. (As mentioned earlier, the decline seems to have “good” reasons.)
This was caused in part by a decrease in the total number of layoffs, which fell below 1 million for the first time during the pandemic, when employers called back workers on leave, according to Daniel Zhao, senior economist at Glassdoor. Permanent layoffs have also fallen below 2 million for the first time since March 2020, he said.
On the other hand, overall employment growth remained below expectations. The workforce rose 210,000 in November, less than half what Wall Street expected. It was the slowest growth rate in the whole year, Zhao said.
The discrepancy – a rosy outlook for unemployment but disappointing employment growth – may seem contradictory.
However, according to economists, it depends on how officials tabulate the U.S. labor market report. The unemployment and employment figures come from two different surveys of households and employers.
“If I had just seen the household survey this morning, I would have been thrilled,” said Bunker. “If I only… [the employer survey], I would be pretty devastated. “
There is usually some variation, but that level of divergence is unusual, Bunker said.
Why the divergence?
The Bureau of Labor Statistics reports payroll numbers with a seasonal adjustment that is intended to control annual work patterns such as vacation settings. Some economists believe the adjustment made difficult by Covid-induced work bias could mask otherwise robust growth.
Without this adjustment, employers reported adding 778,000 jobs. That is 568,000 more jobs than the seasonally adjusted number suggests.
“So we may see a seasonal adjustment that is geared towards a lot more setting options during the holiday season than [is] currently performing, “said Michael Farren, economist and senior research fellow at the Mercatus Center at George Mason University.
“Recall, [seasonal adjustments] were made for comparison with other similar years, “he added.” That means the sky may not collapse after all.
The federal government has also revised up the most recent employment figures in the following months, which could occur in November, economists said.