Elevated Average Duration of Unemployment Signals Improved Labor 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 (BLS, 2018, 2).1 This stood in sharp contrast to the experience in previous recessions, when unemployment stints beyond a half year were much less common. Since the Great Recession, 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. In the past, a long average duration of unemployment indicated structural impediments in the labor market, such as skills mismatches (Wiczer, 2015). Therefore, the current long duration is naturally seen as a sign of continued weakness (St. Louis Fed, 18, inter alia). In contrast, this paper posits that the elevated duration of unemployment actually indicates that the labor market is functioning unusually well. The long duration of unemployment is the result of very short job searches for newly unemployed workers, and is actually unrelated to long-term unemployment. Consequently, policies designed to solve this “problem” may be unnecessary and misguided.