September 9, 2002
Long-Term Joblessness Rose by 50%Over the Last Year
ACOMA, Wash. — Darrel Reiter had been out of work for nine months, and his wife, Norma, had not worked in five months when they climbed into their pickup truck to scour the West for jobs. But from Grand Junction, Colo., to Carson City, Nev., to Pendleton, Ore., the news was always the same, even if it came in different forms.
Their decades of experience in the work force did not make up for their lack of bachelor's degrees. The $17-an-hour job that Mr. Reiter had seen advertised actually paid $10.50 — about a third of his old wage at a manufacturing company — after the cost of health insurance and other benefits was deducted.
After nine days on the road that used up $1,000 of Mrs. Reiter's retirement savings, the couple returned here in August still stuck in the nation's large ranks of long-term unemployed. While the job market remains unusually healthy for the end of a recession, with the unemployment rate below 6 percent, the number of people who have been jobless for months has climbed to a level more typical of a deep downturn.
Almost three million people nationwide have been out of work for at least 15 weeks, up more than 50 percent from a year ago. Half of them have not worked in at least 6 months, the Department of Labor said.
Another million Americans appear to have dropped out of the labor force in each of the last two years, no longer looking for work or counted as unemployed.
Like the Reiters, many people who have not worked in months have begun spending retirement savings that were already diminished by the stock market's fall. Others are considering low-wage jobs that pay a fraction of their old salaries. In either case, their stretches of unemployment could define their financial futures for years to come.
"It gets more complicated as time goes on," said Scott Barry, 41, of Tacoma, who was laid off at the end of last year from Boeing. He had worked at the company since graduating from high school, most recently helping airlines that owned Boeing jets solve mechanical problems.
Having applied for about 350 jobs, in everything from health care to the candy industry, Mr. Barry said he has begun to worry that he would have to use some of his 401(k) retirement savings to pay taxes on his unemployment benefits.
"I don't expect to walk into a $60,000 job just because I had one," he said. "But I do expect to be able to walk into one that pays half that and maybe work my way back up."
"It's almost like I have nothing," Mr. Barry added.
The growth of long-term unemployment takes some of the shine off of the general decline in joblessness over the last 20 years. A smaller share of the work force is unemployed today than after the recessions of the early 1980's and 90's, but most of the decline has come among people out of work for a few weeks at a time.
"The labor market got a lot better in the 90's at taking people who used to have small spells of unemployment and moving them from one job to another," said Lawrence Katz, an economist at Harvard University. He gave credit to the growth of temporary-help agencies and Internet job searches, as well as the unusual strength of the economy.
"But there are still a lot of people who experience long-term unemployment," he said.
In fact, economists say, the aging of the work force and the globalization of industries have combined to make a long stretch of joblessness more likely for many people.
At the same time that millions of people have entered their 40's and 50's, when training for a new line of work is difficult, many of the middle-class jobs that sustained people without college degrees have moved to countries with lower wages. The jobs have often been replaced by service-industry jobs that either are out of reach for blue-collar workers or pay less than $10 an hour.
"They keep telling me I need that piece of paper," a college diploma, said Danny Hicks, who has not worked in almost two years. Mr. Hicks worked at a paper mill for 28 years and has been unable to find a job that pays much more than minimum wage, he said.
In addition, many women who lost their jobs in past downturns then dropped out of the labor force until the economy improved. Today, however, most families depend on a woman's income to pay bills, and women are more likely to continue looking for work for months.
A study last year by Katharine G. Abraham, a former commissioner of the Bureau of Labor Statistics, and Robert Shimer, an economist at Princeton University, called women's "attachment to the labor market" the biggest cause of the increase in long-term joblessness.
[On Friday, the Labor Department said that the average length of unemployment fell slightly in August, to 16.2 weeks. When the jobless rate hovered around 6 percent in the 1970's and 80's, as it has recently, the average length of unemployment was 10 to 12 weeks.]
The job market seems particularly harsh in the Pacific Northwest, a region that was hit hard by the recession and that has perhaps recovered the least. For the 12th consecutive month, Oregon and Washington had the nation's highest unemployment rates — both above 7 percent — in July, the last month for which the Labor Department has released data.
Boeing has cut thousands of jobs in the region in the last three years, as its rival, the European consortium Airbus, has become stronger and air travel has declined. The bursting of the technology bubble has eliminated jobs at dot-com start-ups and big computer-chip makers like Intel, which has plants in the Northwest. A surge in electricity prices and Japan's continuing economic woes have hurt some manufacturers of paper, chemicals, aluminum and even pickles here.
"It all converged last year," said Gary Kamimura, a senior economist at Washington's Employment Security Department. "We don't think we're going to see any sustained recovery until 2004 or 2005."
Many unemployed people here share that view, saying they see little sign that companies will soon begin hiring in large numbers. And some are growing increasingly nervous because unemployment benefits that were extended — as part of federal laws to help workers whose jobs moved overseas or who were laid off after Sept. 11 — will expire soon.
The expiration of benefits typically helps the economy, forcing people to find work eventually and preventing unemployment stretches from reaching the length they do in Europe, where benefits are more generous, economists say.
But people who accept a new job out of desperation can also end up lowering their income for years to come.
Over the last nine months, the Reiters have relied on almost $800 a week in benefits, which will lapse in December. With three of their seven children out of work as well, they also spent the $5,000 that had been in Mrs. Reiter's 401(k) plan, down from a peak of $10,000 during the bull market, she said.
Last year, when the Reiters were both working, they were making almost $3,000 a week before taxes, well above the national average for family income, which is about $1,000 a week. After 9 years working for the Defense Department, she was in her 14th year at Boeing, earning about $45,000 a year in a plant that made airplane ducts. Mr. Reiter was earning about twice as much as a manager overseeing 35 people at a small manufacturing company.
"At our age, it just doesn't seem feasible that this has happened," said Mrs. Reiter, who is 59, and whose husband is 58. "I really don't know what's going on but I'm really frustrated."
"We're definitely going to leave if we can find a place to go," she said.
During past downturns, many of today's unemployed workers were able to switch to healthier parts of the economy, using skills that applied to more than one job.
Mr. Barry, for example, started at Boeing as a mechanic and later became an electrician. He worked in the company's commercial aircraft division, moved to its military division and then back to the commercial side before taking a white-collar job last year talking to Boeing clients by phone.
This time, however, all of the big local industries seem to be contracting at once. For workers who have lost their jobs, the current recession feels no less severe than past downturns that sent the unemployment rate spiraling toward 10 percent.
"I'm so used to getting these cards and letters saying, `We got your application,' " Mr. Barry said. "I'd just like one of them to say, `Come on in.' "