With significant new hiring in the private sector in February and a lower unemployment rate, there was considerable good news in a new jobs report from the U.S. Labor Department. But one of the bad numbers was the stubbornly high level of those out of work for a long time — officially defined as 27 weeks or more.
That number rose to 4.8 million in February from 4.7 million in January. People out of work for that long-term period now account for 40 percent of the unemployed.
It’s data that worries Ben Bernanke, head of the Federal Reserve.
“High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole,” Bernanke told the U.S. Senate last month, before this newest report.
However, given the large amounts of data crunched by the Fed and its member banks, it’s quite likely that Bernanke knew that the problem wasn’t likely to be fixed in the February report.
“Lengthy periods of unemployment and underemployment can erode workers’ skills and attachment to the labor force or prevent young people from gaining skills and experience in the first place — developments that could significantly reduce their productivity and earnings in the longer term,” Bernanke said.
It’s a significant worry, and ought to put a more positive light on the Fed’s strategy of trying to keep interest rates extremely low in the hopes of gradually improving the employment picture.
The Fed’s job is to look at the long term, and with inflation so far not a threat, the issue of getting people to work deserves priority.