Long Average Unemployment Duration Implies Better Job Market

Long-term unemployment was one of the biggest problems during the Great Recession. Nearly half of all unemployed persons were out of work for six months or more. Since then, the average duration of unemployment has gradually diminished along with the unemployment rate, but it has nevertheless remained relatively long. In fact, the average duration is still longer than every prior post-WWII recession. Along average duration of unemployment has traditionally indicated structural impediments in the labor market, such as skills mismatches. Therefore, the current long average duration is naturally seen as a sign of continued weakness. In contrast, this paper posits that the elevated duration of unemployment actually indicates an unusually well-functioning labor market. The long duration of unemployment is the result of very short job searches for newly unemployed workers and is unrelated to long-term unemployment. Consequently, policies designed to solve this "problem" may b unnecessary and misguided.