Though the Labor Department’s monthly jobs report is still showing modest gains (about 560,000 jobs were added in May), there is some really good news to report on the jobs front: long-term unemployment is finally falling. In fact, May marked the second straight month where this metric decreased, a sign that layoffs are finally waning as COVID-19 restrictions ease nationwide.
Specifically, long-term unemployment fell to 3.8 million people in the month of May, a decrease of 431,000 from a month prior. Yes, that’s still relatively high, but this is an improving metric. Per the U.S. Bureau of Labor Statistics, these numbers represent a 43 percent reduction from April and a 43.4 percent reduction from March. Long-term unemployment is defined as workers who have been jobless for at least six months. It’s great news that some of these key metrics are on the downswing, however it might not all be good news — and we don’t quite know all the data behind this long-term unemployment trend just yet. Allow us to explain:
Leaving the Workforce?
The fact that the Labor Department is only posting modest job growth could suggest that the long-term unemployment rate isn’t decreasing for the right reasons. Specifically, there’s some belief that this decline may have to do with out-of-work Americans leaving the workforce altogether. The longer you’re out of work, the more difficult it is to get a new job.
When you take into account the 3 million women who have left the workforce as a result of the pandemic and aging Americans who may opt to call it a career rather than start fresh at a new firm, this belief is certainly plausible. Again, it’s too soon to tell what we can truly attribute to the long-term unemployment decline that we’re seeing now, but it’s not unreasonable to think that it could be a mix of a few different factors.
Will This Trend Continue?
As hiring picks up and states begin to crack down on who exactly is eligible for the enhanced unemployment benefits made possible by the American Rescue Plan that was passed earlier this year, it’s likely that this trend will indeed continue. But job growth is still fairly modest. In May, 560,000 jobs were added against an estimate of more than 670,000. The enhanced unemployment benefits are still likely a motivating factor for many Americans not to seriously pursue work, and certainly there’s still some concern about safety in certain working environments — even among vaccinated Americans. More than 20 states are cutting off these enhanced jobless benefits over the summer (the official deadline per the American Rescue Plan is early September) to further stimulate their job markets. Noting all this, the jobless rate should continue its decline throughout the summer and into fall.
