US recovery risks being hobbled by growing army of long-term unemployed

The US economy's recovery risks being hampered by the creation of a new army of long-term unemployed, whose number has more than doubled in the past 12 months.

By James Quinn
Published: 3:26PM GMT 05 Feb 2010

Although a widely-watched monthly jobs report on Friday showed that the unemployment rate fell to 9.7pc in January from 10pc in December, the report also revealed that 41.2pc of those without work - or 6.3 million people - have now been so for more than six months and are officially classed as long-term unemployed.

Statistics released earlier this week showed that 4.6m Americans continue to claim long-term unemployment benefit, signalling 1.7m of those defined as long-term unemployed either do not want to claim or are no longer eligible.

These figures are important, as those out of work for significant periods typically find it harder to find work even once a robust recovery begins, and because they can create a drag on their wider families’ economic output, restricting consumption.

Overall, Friday's report showed a mixed picture, with more jobs lost than expected but a slight improvement in the overall unemployment rate. Some 20,000 Americans lost their jobs in January, worse than US economists had predicted.

But the unemployment rate fell, down from 10pc in December to 9.7pc, the lowest in five months, with 14.8m people out of work at the end of last month, compared to 15.3m at the end of the prior month, an improvement of some 500,000 people.

However the bulk of the improvement related to an increase in those not long for work in January – up 409,000 to 2.5m. Of those, 1.1m were so-called ‘discouraged workers’ – who were not looking because they believed no jobs were available – while the remainder did not so do for because of other reasons including family responsibilities.

The mixed report left stock markets uncertain how to immediately respond. The Dow Jones Industrial Average was off 0.6pc, while the Standard & Poor's 500 was 0.5pc weaker.

With all the past revisions accounted for, some 8.4m Americans have lost their jobs since the start of the US recession in December 2007. The new statistics also showed that those who are in work are working longer – in part to cover the work of redundant former colleagues – with the average work-week rising to 33.3 hours – the highest in a year – from 33.2 hours.

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