The labor market ended 2016 on a positive note. The unemployment rate is low at 4.7%. Employers are increasing wages to snag fewer available workers.
That all sounds good, at least until you ask about 25% of Americans out of work.
The tightening job market that the Labor Department portrayed last week has delivered only limited benefits to one group: the long-term unemployed. The number of people jobless six months or more may have fallen by 25,000 to 1.8 million in December and is down from 6.8 million in 2010. Yet they still represent a quarter of all those unemployed, about the same as a year ago and up from 18% before the recession began in late 2007.
Daniel Brown, who led a $200 million business unit that made material for packaging and labels and has an MBA from the University of Chicago, thought he would land a similar six-figure job within a few months of losing the position in September 2015 due to a restructuring.
“It used to be jobs found me,” says Brown, 46, who lives in Wheaton, Ill. “The world has definitely changed.” He has learned, for example, that his diverse work history, which includes overseeing marketing, strategy, and mergers and acquisitions, is viewed as a negative by the many firms that seek in-depth experience in specific areas.
Brown and other job-seekers are experiencing a market where companies really need workers but they’re being very selective. Many businesses remain locked in a post-recession mindset ingrained by the downturn’s severity, and that's adding up to long-term frustration for workers on the sidelines for at least six months.
“They have realized that it’s very expensive to hire and very expensive to make a mistake, and they’re less willing to take a risk,” says Jeanne Branthover, managing partner of DHR International, an executive search firm. “Before 2007, my clients were hiring and firing and not thinking about it.”
And while a shortage of workers, particularly for high-skilled jobs, is helping many of the chronically jobless land positions, a tepid economic recovery and post-recession caution still leads many employers to balk at hiring them.
By contrast, the tight market is more clearly benefiting groups such as high school graduates, whose unemployment rate has fallen the past year even while the rate for college grads has been stagnant.
Dean Baker, co-founder of the Center for Economic and Policy Research, has a theory: “I don’t see it as that strong a labor market” despite solid job gains in recent years and a near-normal unemployment rate.
Baker notes that the number of part-time workers who prefer full-time jobs also remains elevated at 5.6 million, up from 4.5 million before the downturn. And while annual wage growth picked up in November to 2.9%, it’s still below levels consistent with the near-normal jobless rate.
Carl Van Horn, director of the Heidrich Center for Workforce Development at Rutgers University, rattles off the roadblocks faced by the long-term unemployed including having to explain large gaps on a resume and age discrimination. In 2015, about 36% of the long-term unemployed were 55 or older, Labor Department figures show. And some have seen their skills atrophy or have succumbed to depression, alcoholism or drug abuse, Van Horn says.
Such issues historically have plagued long-idled workers. A big difference nowadays, he says, is that some of the nearly 9 million workers who lost jobs in the recession have yet to find work, or retire, and continue to drift in and out of the labor force, searching for jobs sporadically.
About 5.5 million Americans are not in the labor force — and so not counted among the unemployed — but still want a job now, up from 4.3 million before the recession, the Labor Department says. Simply put, Van Horn says, the occasional job searches by those laid off in the downturn creates more competition for jobs among the long-term unemployed.
Meanwhile, many employers are grappling with low growth in productivity, or output per labor hour, that has narrowed their profit margins and made them less willing to invest in workers that may need retraining, such as the long-term unemployed.
“In the 1990s, when productivity growth was high, they were willing to go out and hire anybody that had a pulse,” says economist Diane Swonk, who heads DS Economics. “When you really need people, you do what it takes.”
Baiju Coilparampil, 47, lost his job as chief financial officer of a company that provides mail and document management services when it was acquired by a larger firm nine months ago. He also thought his job search would be brief. But he says companies that used to seek candidates who met eight of their 10 requirements now want perfection.
“They always think there’s a better candidate out there,” says Coilparampil, of Monroe, Conn. He has exhausted his severance and his unemployment insurance will run out within weeks, forcing his family to cut back or eliminate frills such as dining out and vacations. “It’s tough to stay positive all the time.”
Yet a growing number of companies that had been reluctant to bring on the long-term unemployed are more willing to offer them temporary jobs initially or training, says Paul McDonald, senior executive director of staffing firm Robert Half.
Citing the tight labor market, he says, “It’s out of necessity.”
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