America Has a Jobs Plot Twist: Nearly 2 Million Jobless for 27+ Weeks Despite US Unemployment Rate at 4.1%

Nearly 2 million Americans had been unemployed for at least 27 weeks in August, even as the US unemployment rate held at 4.1%, according to the Bureau of Labor Statistics.

The BLS counted 1.93 million long-term unemployed people, up from 1.77 million in July. They accounted for 27% of all unemployed people in August, compared with 25.5% in July and 27.5% in May. The figures are seasonally adjusted.

The 4.1% unemployment rate measures the share of the labour force without a job, while the 27-week measure tracks how long unemployed people have remained out of work. The two measures capture different parts of the labour market.

The total number of unemployed people was about 7.0 million. The BLS said the number of long-term unemployed changed little at 1.9 million in August. The seasonally adjusted count was 1.93 million, 159,000 higher than July.

The 26.3-week mean is not the typical spell. The median was 11.4 weeks. The difference reflects the smaller group of people who remain unemployed for much longer periods.

Richmond Fed Ties Rise to Weaker Job-Finding

The Federal Reserve Bank of Richmond examined the shift in its August Economic Brief, 'The Ins and Outs of Long-Term Unemployment'. Economists Katarína Borovičková and Claudia Macaluso wrote that the recent rise in long-term unemployment was almost entirely explained by falling outflow rates, meaning the share of unemployed people who leave unemployment over a given period, particularly job-finding rates, the share of unemployed people who move into employment.

The researchers also found that the gap between job-finding rates for people unemployed for shorter and longer periods had widened. They said the gap had previously widened during recessions, making the expansion-era widening unusual.

Payrolls Are Still Growing

US nonfarm payrolls increased by 162,000 in August, while the unemployment rate remained at 4.1%, the BLS reported. The payroll increase was above the average monthly gain of 31,000 over the previous 12 months.

Food services and drinking places added 59,000 jobs, compared with an average monthly gain of 12,000 over the previous year. Local government education employment rose by 42,000 jobs.

Healthcare added 13,000 jobs, below its average monthly gain of 32,000 over the previous year. Information employment fell by 23,000, compared with an average monthly decline of 8,000 over the previous year.

The BLS said the information-sector decline included losses in computing infrastructure providers, data processing and web hosting, publishing and broadcasting.

State UI Rules Vary Around 26 Weeks

Unemployment insurance is administered by individual states, which set their own eligibility rules and benefit durations. The US Department of Labor says regular unemployment benefits vary by state. Many states have historically provided up to about 26 weeks of regular benefits, although some offer shorter or longer periods.

The BLS measure of long-term unemployment and state unemployment-insurance rules are separate. Reaching 27 weeks of unemployment does not itself establish that a person's benefits have ended.

Fed Raises Rates to 3.75%–4%

The Federal Reserve raised its target range for the federal funds rate by a quarter percentage point on 16 September, taking it to 3.75% to 4%. The Federal Open Market Committee said economic activity had been expanding at a solid pace, productivity growth remained strong and capital investment was robust. It also said the unemployment rate had changed little.

Fed Governor Lisa Cook said on 28 September that inflation had remained 'too high for too long' and that the labour market 'appears to be well positioned to handle an increase in rates'. The next BLS employment report, covering September, is due on Friday, 2 October.