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Latest jobs report shows long-term unemployment still on the rise, worrying economists

The number of unemployed Americans who have been jobless for more than 26 weeks jumped to 3.6 million in October from 2.4 million the month before.
Las Vegas Entertainment Workers Hold Drive And March Event To Support Industry Decimated By COVID-19
Heather Morris and her husband, Thomas Morris, hold signs during a "Drive and March" event held by We...The Entertainment Community of Las Vegas on Aug. 19, 2020.Ethan Miller / Getty Images file

Fewer Americans are losing their job — but data just under the surface reveals bad news. Although unemployment numbers have been steadily falling since the first pandemic surge in the spring triggered a record-breaking wave of job losses, the amount of time workers are sidelined has jumped — a reflection of how dire many sectors of the economy remain, and a worrying indication that millions of jobs across a wide range of service-sector industries might be gone forever.

The number of unemployed Americans who have been jobless for more than 26 weeks jumped to 3.6 million in October from 2.4 million the month before, on a seasonally adjusted basis, and comprise roughly a third of all unemployed workers. The median duration of unemployment has climbed to 19.3 weeks, more than double what it was a year ago.

This worries labor economists and social scientists.

“The longer you’re out of work, the harder it is to get re-employed,” said Maria Heidkamp, director of the New Start Career Network at Rutgers University. “I think we're on the cusp of catastrophic long-term unemployment. The fact that so many of the layoffs we thought were going to be temporary have turned out to be permanent — we’re just not prepared for that right now,” she said.

“If they're in mid- to late-career, it may mean a permanent decline in their earnings,” said Jeffrey Wenger, a senior policy researcher at the RAND Corporation. “Losing your job late in your career is a very damaging phenomenon,” he said, one that can damage people’s financial stability and retirement security.

Juan Fernandez had been looking forward to March. The top manager at a hotel in Savannah, Georgia, the 46-year-old was preparing for a full house as visitors converged on the city to participate in its renowned St. Patrick’s Day celebration. “We were expecting St. Patrick's Day to be a humongous event,” he said, but travel restrictions and business shutdowns slammed the brakes on his business.

“We had 20 rooms out of 250, no food and beverage business, nothing,” he said, and the hotel shut completely for 90 days shortly thereafter. After furloughing around 260 employees, Fernandez knew he was next. He has been looking for work ever since.

Fernandez said as hotels — including his former workplace — came back online, they didn’t bring back high-paying management positions.

“Instead of hiring someone like me at almost $200,000, they hired a director of operations for about half that salary,” he said. It has made his job search slow going. “A job that six to eight months ago was going for $160,000, $180,000, they’re trying to bring people in at $75,000, $80,000. It’s disheartening for someone like myself that has years of experience, is highly skilled, knows what it takes to be successful and knows the true value of their role,” he said, but he acknowledged that the economic climate is a buyer’s market for employers. “Really, it’s just so highly competitive at this point with so many people in the service sector out there,” he said.

The number of unemployed Americans who have been jobless for more than 26 weeks jumped to 3.6 million in October from 2.4 million the month before.

Hannah Miller, a 33-year-old in Ventura, California, is searching for a new position.

“I have a desirable masters degree in terms of fundraising, and I have over 10 years of experience in the nonprofit sector,” Miller, who has three children, told NBC News.

She returned from maternity leave in early spring, only to lose her job at a nonprofit consulting firm in June. Like Fernandez, she has found the job search discouraging at times, as employers retrench and cut compensation. “Most people in the nonprofit sector have probably taken some kind of pay cut,” she said. “Just yesterday, I came across an executive director position they were trying to fill for $35 an hour.”

The pandemic has altered what researchers think of as “typical” recessionary labor market shrinkage. “Jobs that are usually safe, namely service sector jobs, social services, retail sales — those jobs are the ones that were most affected,” said Till von Wachter, professor of economics and director of the California Policy Lab at the University of California, Los Angeles.

One result is that professionals can’t simply find a job as a barista or store clerk to tide them over during a stretch between jobs. Another is that the sheer size of this country’s service sector means that this displacement is happening at a massive scale — and the U.S. doesn’t have the tools to realign workers and their skill sets to this new reality.

“The real question in my mind is to what extent the place-based economy is going to restructure itself because of Covid-19,” Wenger said. “We may just see a permanent decline in demand for restaurant meals or massages or hotels and travel-related services, things that have to be place-based, and if that’s the case, you're looking at a significant portion of the U.S. labor force struggling to find work.”

The unemployment insurance system was never intended to fill the enormous gaps in today’s labor market, Wenger said. “Unemployment insurance is designed to deal with frictional unemployment — your skills are still useful, there's still a market for your work. Structural unemployment is not like that.”

Researchers say this implies a need for more resources devoted to retraining and retooling the capabilities of a large number of workers. “There’s really limited support from the public workforce system,” Heidkamp said. “We spend less than any of our peers in the OECD trying to help job seekers. Our programs are kind of piecemeal and mostly inadequate, and that makes it more challenging still.”

“Some of those jobs will not be returning. People will need to train for new professions,” said Austin Nichols, economist at research firm ABT Associates. “In a time like right now, where effectively you can borrow for free, it makes sense for the federal government to do a lot of this,” he said, but as lawmakers are consumed with a drawn-out electoral battle, there appears to be little legislative appetite to address this misalignment.

We may see a permanent decline in demand for place-based services such as restaurant meals or massages or hotels — and if that’s the case, you're looking at a significant portion of the U.S. labor force struggling to find work.

This means that workers, for the most part, are left to their own devices. “Unfortunately, my unemployment ran out earlier in October,” said Nicolas Leininger, a business development and sales professional in Washington, D.C., who lost his job in April. “I tried to reapply for unemployment, but they sent me something in the mail saying I’d received the maximum amount.”

The 26-year-old estimated that he has applied to a few hundred jobs, which he tracks in a spreadsheet, and he worried that his unemployment put him at a disadvantage in negotiations. “I think in some ways it is a barrier because I don’t really have any bargaining chips,” he said. “I feel like it’s harder when you’re in those interviews because they know you have to take what you can get.”

If he can’t land a new job by the end of the year, Leininger said he might give up and go back to school. “I’m not someone in the STEM fields. I don't feel like my skill set is the most valuable,” he said. “Come January, if I don't have anything locked down, maybe I’ll consider going back to school or moving back in with my folks… I could go through my rainy day fund and have nothing to show for it.”