Unemployment rate masks high share of long-term unemployed

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Snapshot for November 10, 2004.

Unemployment rate masks high share of long-term unemployed
In March 2002 Congress enacted the Temporary Extended Unemployment Compensation (TEUC) program, giving most workers who had exhausted their regular unemployment insurance (UI) benefits an additional 13 weeks of coverage in most states, and an additional 26 weeks in high unemployment states.

When the TEUC program was enacted, the national unemployment rate was 5.7%. Of those who were unemployed, 8.5%—about 700,000 unemployed workers—had been unemployed for more than 39 weeks.

As the figure shows, the unemployment rate for the third quarter of 2004 was 5.5%—not much lower than when TEUC was enacted. However, the share of the unemployed who had been unemployed for more than 39 weeks in the third quarter of 2004 was 14.5%, or 1.2 million of the unemployed—much higher than when TEUC was enacted. Historically, a share this high has been associated with much higher unemployment rates. For example, the share of very long-term unemployed was 16.4% in the fourth quarter of 1992 when the unemployment rate was 7.4%—at which time extended federal unemployment benefits were available.

Despite the elevated percentage of very long-term unemployment, today's unemployed workers are not able to receive any extension of their regular state UI benefits.  Neither of the two options for extending the duration of UI benefits—another round of federally funded TEUC and the federal/state Extended Benefit program—are currently available to assist the very long-term unemployed.  (Eligibility for TEUC expired in December 2003, and workers received their final benefits under the program in March 2004.)
 
While some may question the necessity of extending benefits given today's 5.5% unemployment rate, this rate hides very long spells of unemployment for many workers who have no extended UI benefits to tide them over.

Source: BLS data and author's analysis of CPS data.

This Snapshot was written by EPI economist Sylvia A. Allegretto and EPI Deputy Director of Policy Amy Chasanov, with data assistance from Jin Dai.