Wall Street Journal (03/26/12) Ben Casselman
The hiring picture has improved in recent months, but not for everyone. In February, 3.5% of the U.S. work force was unemployed for more than six months, compared with 4.0% in February of 2010, a smaller decline than in the overall jobless rate. The average unemployed worker has been jobless for 40 weeks, a mark that has barely budged in the past six months. The diverging fortunes of the long- and short-term unemployed suggests the emergence of deeper, structural problems that could persist long after the rest of the economy recovers. Rather than returning to work as the economy recovers, as they have after past U.S. recessions, the long-term unemployed could effectively break off from the normal job market.
Economists term this prospect “hysteresis,” a term borrowed from chemistry meaning that the past affects the present. The U.S. has little history with such problems, and even in the early 1980s, when the U.S. unemployment rate got close to 11% at one point, the average length of unemployment, at its peak, was just over 21 weeks, and fell quickly from there. Most economists believed that the more flexible, business-friendly American labor market would protect the U.S. from hysteresis, but some are re-evaluating that assumption. They argue that in the wake of a severe recession, the lines between cyclical and structural unemployment can become blurred.