Millions of unemployed may never recover

WASHINGTON — Despite recent job gains, one grim statistic casts a long shadow over the recovering economy and the futures of more than 6 million workers: Fully 44 percent of the nation's 15 million unemployed have been out of work for more than six months.

And evidence suggests many of them may never rebuild their working lives completely.

Never since the Great Depression has the U.S. labor market seen anything like it. The previous high in long-term unemployment was 26 percent in June 1983, just after the deep downturn of the early '80s. The 44 percent rate this year translates into more than 6.5 million people.

In fact, nearly two-thirds of these workers actually have been jobless for a year or longer, new Labor Department reports show.

"I'm particularly concerned about that statistic, because long spells of unemployment erode skills and lower the longer-term income and employment prospects of these workers," Federal Reserve Chairman Ben Bernanke said in a Wednesday speech.

The hardships of workers are straining the nation's finances, too. In normal times, jobless workers can qualify for up to 26 weeks of state unemployment benefits. But the crisis of the past two years has prompted the federal government to help fund jobless benefits for up to 99 weeks in high-unemployment states, including Washington.

Congress is poised for yet another partisan showdown over the issue Monday when lawmakers return from a two-week recess. The Senate is scheduled to vote on whether to end debate on a measure that would further extend jobless benefits, subsidies for the COBRA health-insurance program and federal flood insurance through May 5. Because some Republicans want spending cuts elsewhere to offset the $9 billion price tag, Democrats will need at least one GOP supporter to get the 60 votes necessary to proceed.

Federal spending on unemployment benefits could reach $168 billion this year, five times the level in the years just before the recession, according to a report from Pew Charitable Trusts. Tens of billions more are being spent for food assistance to unemployed workers and their families.

At the same time, government revenues have fallen as Social Security, payroll and other tax receipts have shriveled with fewer jobs and lower earnings. That's contributed to massive fiscal problems in many states. California already owes the federal government about $7 billion for unemployment-benefit loans and is getting deeper in the hole by the week.

"It's really killing the deficit," said David Card, an economics professor at the University of California, Berkeley, which has made cuts in faculty pay and course selections.

The rise in long-term unemployment — coupled with economists' projections of a slow jobs recovery — mean the toll to individual and government budgets is likely to persist for some time. Labor Department figures suggest there are 5.5 unemployed workers today for each job opening, compared with two job seekers for every opening in 2007.

The problem has another, less direct impact as well: Since many of the long-term unemployed are older workers, some will have little choice but to retire earlier than planned — which means more people drawing Social Security and Medicare, and fewer contributing to the programs through payroll taxes.

As in previous downturns, a large share of long-term unemployed are in manufacturing and construction.

But most workers who have been jobless for 27 weeks or more are in sales, office and other service-industry jobs, including more than 1 million in management and professional occupations.

Some economists doubt that workers in general would lose skills after only six months or even a year or two out of work. But there's widespread agreement that — for whatever reasons — long periods of unemployment tend to make it tougher to get re-employed.

And even after getting hired, such workers are likely to experience a sharp and lasting hit to their incomes.

In one prominent study, Columbia University economist Till von Wachter examined the pay history of workers who lost their jobs during the early 1980s recession. Using Social Security earnings records, von Wachter and co-researchers found that these previously stable workers sustained a 20 percent drop in earnings after 10 years of losing their jobs, compared with other workers who weren't let go during that period.

For the laid-off group, the income losses didn't fade away completely even 20 years later.

The Senate failed to agree on an extension in unemployment benefits in late March, after Republicans rejected an attempt to expedite the measure's passage. As a result, more than 200,000 unemployed people who had exhausted their states' jobless benefits could not apply for additional benefits from the federal program beginning last Monday, according to estimates by the National Employment Law Project, a liberal advocacy group.

Democrats note that they easily moved an extension through the House and were primed to do the same in the Senate before Republicans, led by Sen. Tom Coburn, R-Okla., stood in the way.

Republicans respond that they're not opposed to extending unemployment benefits but want to offset the cost. Sen. Jim Bunning, R-Ky., made the same argument when he led the GOP's stand against a previous extension in early March. That blockade lasted five days and drew national attention, much of it unfavorable to Bunning and his party.

Jim Manley, a spokesman for Senate Majority Leader Harry Reid, D-Nev., noted that unemployment insurance often has been treated as emergency spending, and that many economists believe such benefits have a stimulative effect that would be muffled if offset with spending cuts elsewhere.

But Coburn, long a leader of the Senate's fiscal hawks, said the political winds are shifting in his favor. "We can't wait anymore," he said. "Every day we don't start taking care of this problem makes it worse."

Coburn vowed to try to block any spending bill the rest of the year that isn't offset, which will include the $33 billion supplemental measure the Pentagon has requested for the Iraq and Afghanistan wars. While unlikely to succeed in blocking the military measure, Coburn said he hopes his stand draws increased attention to the deficit issue.