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Can long-term unemployed find work in improving US economy? There's hope. (+video)

The 3.6 million long-term unemployed account for 2.3 percent of the nation's workforce – still a historically high level in Year 5 of the recovery – posing potential problems for the economy.

By , Staff writer

Todd Hamilton was out driving a delivery route for Hostess when a frightening message arrived: He would have to turn his truck around and exchange the keys for a pink slip.

His employer, long known as Interstate Bakeries, was going out of business.

Many Americans at the time fretted (needlessly, it turned out) about whether this meant the end of Twinkies and other Hostess snack cakes. But on that November day in 2012, Mr. Hamilton had a much more pressing concern: He was out of work in a tough economy, along with the other workers.

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For months, he struck out in his efforts to find a similar job near his home in south central Michigan. He looked for both truck-driving jobs and any other options, but says the only ones available seemed to pay near minimum wage.

Helping him survive were unemployment benefits that Congress had extended beyond the typical 26 weeks to address the labor-market emergency. "Without that I wouldn't have been able to pay my bills," Hamilton says.

Across the nation at least 3.6 million Americans – and probably many more than that official count – are facing a similar challenge of long-term unemployment.

To grasp what that means for the health and future growth of the economy, consider this: The "long-term unemployed" alone account for 2.3 percent of the nation's workforce – a share that's almost as high as it's ever been during the depths of any prior recession since Labor Department tallies began in 1948. That's the case even though this is not a recession but roughly Year 5 of a recovery that began officially in June 2009.

America's high rate of long-term joblessness is important for a couple of big reasons, economists who study labor markets say. First is the toll it takes on affected individuals and their families, not just financially but in other ways, such as on their physical and mental health.

"The human concerns are quite serious," says Ann Huff Stevens, a labor economist at the University of California, Davis.

More broadly, the historic upward spike in long-term joblessness could potentially dent the pace of US economic growth for decades ahead, she and others say.

Growth, after all, hinges on things like an economy's overall supply of labor and the quality of "human capital" (education and skills). The US loses productive capacity when people drop out of the labor force, or when workers' skills and earning potential are held back by a long period on the sidelines.

President Obama summed up the issue this way at a recent event enlisting business executives in efforts to hire the longtime jobless: "We are stronger ... when America fields a full team."

Hamilton's story, meanwhile, embodies both the challenge and the hope for solutions.

Fast-forward to today, and his situation has turned around. He has a job he's enjoying, for good pay, and he didn't have to move. This happy conclusion arrived just weeks ago, after a year-long odyssey that included finding a new career path and going through intensive retraining.

His new employer is Hatch Stamping, which makes metal parts for the reviving US auto industry.

To those trying to find their way back from joblessness, Hamilton offers words of encouragement and advice:

"I'm 54 years old and chose a completely different profession and a completely different direction. Don't be afraid to do that," he says. "It's hard, but there's people out there that'll give you a chance."

His story is not unusual.

Many Americans are getting jobs, finally. Yet, even more than four years into an economic recovery, it's still taking some 37 weeks on average for the jobless to find new work – about twice as long as during past economic expansions.

The problem

What can be done to solve the problem? Economists say the biggest answer must be improvement in the overall job market – the ultimate salve whether people have been out of work for a short or lengthy stretch. Another important answer, though, may be targeted programs to help ensure that would-be workers don't get lost on what can be an arduous journey.

Hamilton, for example, followed a multistep course that was ultimately successful. Stages along the way included the following:

•Realizing he needed a new career.

•Learning he was eligible for counseling help under a government program for displaced workers.

•Selecting a new occupation (operating computer-controlled manufacturing equipment) that held the promise of job opportunities and good pay.

•Finding a local group (the Jackson Area Manufacturers Association) that would train him, and persisting in the intense, four-month effort.

Even after he was trained, Hamilton had several more months of looking and waiting before he landed the job he started in January. In December, Congress had let the extended federal unemployment benefits expire amid partisan battles over broader budget issues.

The still-high level of long-term unemployment explains why Congress is debating whether to renew those benefits, even though the nation's official unemployment rate has fallen from 10 percent in 2009 to 6.6 percent today.

"We have huge numbers of people who have been out of work for more than a year," says Jerry Rubin, who heads the nonprofit group Jewish Vocational Service of Greater Boston, part of the nation's patchwork of public, private, and charitable support for the unemployed.

In Massachusetts alone, he says, "thousands and thousands ... lost their benefits" at the end of 2013.

For now, some big questions are unanswered on how harmful to the economy this sustained surge in long-term unemployment has been.

One is this: How many Americans have already stopped looking for work because they are discouraged – and thus are not counted as officially unemployed? The number could be 2.5 million or more, some researchers say, although the Labor Department officially counts just 800,000 in its "discouraged" category.

A follow-on question: How many people will return to the labor force when and if the job market gets stronger?

The so-called participation rate in the job market has been generally falling in recent years. Demographics explain a goodly chunk of the trend, since growing numbers of baby boomers are reaching retirement age.

Still, many economists expect some uptick in participation as the economy continues to improve.

What's promising is this: By many indicators the long-term unemployed don't look vastly different from the people who lose jobs and find them again more quickly. Both groups have similar profiles when it comes to things such as education and occupation.

Why is that a hopeful thing? It suggests that the long-term unemployment problem has more to do with a weak rate of job creation than with what economists call "structural" issues, such as when large groups of people have obsolete skills.

One sign of this promise: The official level of long-term joblessness has been declining fast. A big caveat is that, again, not all the long-term jobless show up in that chart.

Older workers can face particularly difficult hurdles in getting back to work.

Deborah Wetterich of Cincinnati lost her job at a medical lab last May, when her employer decided to consolidate its nationwide operations. Since then, she's looked for new work in her field but has had only two job interviews and no offers.

She has lost jobs and changed jobs before, and has never had much trouble finding work until this time.

"You get into health care and you think it's untouchable" as a growing segment of America's service economy, she says. "I've come to realize that nothing is secure."

Part of the challenge, she believes, is that when a lab job does open up, employers will choose younger applicants who are also trained in the field. Employers "can pay them probably $10 an hour less than they would pay me," says Ms. Wetterich, who is in her mid-50s.

Wetterich is not eager to retrain for a new occupation, but the difficulties in finding lab work have prompted her to start applying for other kinds of jobs as well.

With her unemployment benefits now expired, she and her husband now live solely off the income from his custodial job, plus some support from their children who live nearby.

The long-term unemployed aren't just people age 50 and older, however. Rather they're a cross section of the labor force.

Christopher Pafford, age 33, has a degree in chemistry and experience in both the private and public sectors. But he, too, has been out of a job more than half a year.

He and his family recently moved from Tennessee to the outskirts of Atlanta for a job his wife found. Mr. Pafford says his challenge is that, while there's more demand for people with expertise in organic chemistry or polymers, his background is in the environmental chemistry of drinking water or waste water.

"[What] everybody is wanting I don't have," he says.

Pafford took his most recent job, with the Tennessee Health Department, in part to broaden his skill range, but his section was forced into job-cut mode before he could get the desired training.

Solutions

What steps could policymakers take to help people like Wetterich and Pafford get back to work?

Some targeted efforts might be able to help the long-term unemployed fare better. Here are some ideas:

•General job-search skills. The unemployed often need support or counseling on things such as how to look for job openings, fine-tune a résumé, and sharpen their presentation during job interviews, Mr. Rubin at Jewish Vocational Service says. "They still actually have very marketable skills" but often lack confidence, he says.

•Support for retraining. New skills are often the ticket to a job. The optimal model is a local one in which employers and local institutions such as community colleges work together to match training with demand, says Gregory Acs, a labor expert at the Urban Institute in Washington.

Even as this grass-roots model grows, federal dollars may have an important role to play. Unemployed workers often lack money to pay for courses, and federal funding has been falling far short of the national need, Rubin says.

•Skills certification. In some cases, workers have up-to-date skills, but the challenge is to prove that to a potential employer. Exams that verify skills could make these applicants stand out as employable, Mr. Acs says.

•Wage subsidies. Some economists have proposed temporary incentives that offer payroll-tax breaks or wage subsidies to employers who hire people who have been long out of work.

That's not a perfect solution. Some of the subsidized hiring would have occurred anyway, for example. And for each winner from the ranks of the long-term unemployed there might be a loser (another job seeker who missed out as a result). But Ms. Stevens of UC Davis says it's "probably worth trying" all the same, to help break the cycle whereby the long-jobless look steadily less employable.

To help the unemployed, the biggest need is simply for more new jobs to be created.

This means consumer demand and business investment from the private sector, but it also means government policies that support job formation rather than getting in the way. Some ideas being proposed by the Obama administration or Republicans include corporate tax reform, free-trade deals that can open export opportunities, and public spending on needed infrastructure.

Some economists say an important piece of the jobs puzzle is to encourage more new-business formation – which is currently running at a slower-than-normal pace.

It's not just that unemployed people might find jobs at new firms, it's also that they can help to create them. That was the story for David Wadler when he faced a long jobless period in the early 2000s. He had experience in the high-tech industry and, after his long bout of unemployment, battled head winds to launch Twistage, a company that helps businesses share video content online.

Eventually that wrote a ticket for 10 jobs, beyond just his own.

Mr. Wadler, in New York, knows what it feels like to run into dead end after dead end. "The fear of rejection might be paralyzing," he says, whether someone is submitting job applications or seeking financial backing for a start-up. But he urges people to stay focused on their goals and persist.

Hamilton, in Michigan, echoes that idea. His experience felt like being in a dark bedroom, and getting a job was like when "you open the curtain and the sunlight finally shines in."

His job came thanks to an improving economy that opened up more manufacturing jobs, but also because of his own strategizing, study, and persistence.

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