Bloomberg News

Job-Hunt Time Shrinks in U.S. From Record High

March 03, 2013

Joblessness Down as Bernanke View of Cyclical U.S. Weakness Wins

For 13 million out-of-work Americans, record spells of joblessness are abating. Photographer: Jin Lee/Bloomberg

Vicki Cook, 52, landed a job two weeks ago at a trucking company after applying for 50 positions in almost four months. “It was a blessing,” said the Okarche, Oklahoma, woman, whose previous job had been eliminated.

For 13 million out-of-work Americans, record spells of joblessness are abating. The median duration fell to 16 weeks in January from 25 weeks in June 2010, Labor Department data show. Fewer people compete for each opening as hiring expands, and persistent long-term unemployment is starting to mend.

The progress supports Federal Reserve Chairman Ben S. Bernanke’s view that America’s labor market remains flexible and isn’t succumbing to hysteresis, or permanently higher joblessness, similar to Europe in the 1980s, said Dale Mortensen, a professor of economics at Northwestern University in Evanston, Illinois, and 2010 Nobel laureate. That suggests continued monetary stimulus can bring about a faster healing.

“There is little threat that aggressive monetary policy will be inflationary,” said Mortensen, who pioneered the study of how workers search for jobs. “The market will return to normal as household consumption does. That will still take more time but seems to be happening.”

The Fed probably will continue buying $40 billion of mortgage-backed securities and $45 billion of Treasuries a month though the end of the year or into 2014’s first quarter, said Russell Price, a senior economist at Ameriprise Financial Inc. (AMP:US) in Detroit, the most accurate forecaster of monthly employment gains for the two years ended in December, according to data compiled by Bloomberg.

Less Slack

Less slack in the labor market will raise demand for temporary staffing companies, said Jeffrey M. Silber, BMO Capital Markets senior analyst in New York, who rates Manpower Inc. (MAN:US), On Assignment Inc. (ASGN:US) and Robert Half International Inc. (RHI:US) as “outperform.”

“As it becomes more difficult to find qualified labor, you need to use outside experts -- whether temporary staffing providers or full-time recruiters -- to help fill these positions,” he said.

A tightening labor market “should help pricing power of staffing firms prospectively,” agreed Andrew Steinerman, a business-services analyst in New York at JPMorgan Chase & Co., who has an “overweight” rating on Manpower and Robert Half.

Employers added about 160,000 jobs in February, and the unemployment rate remained at 7.9 percent, according to median estimates of economists surveyed by Bloomberg News ahead of a Labor Department report March 8.

Biggest Turnaround

Older Americans, who typically have the most trouble moving from one job to another, have experienced the biggest turnaround in unemployment duration, Labor reports show. For ages 45 to 54, the median period decreased to 26 weeks in the fourth quarter from 31 weeks two years earlier; for people 55 and over, it was 29 weeks compared with 36 weeks.

Applicants face less competition since hiring resumed following the end of the 18-month recession in June 2009. The number of unemployed people per job opening fell to 3.4 in December from 6.7 in July 2009, data compiled by Bloomberg show.

“The duration of unemployment will continue to decline,” said Robert Hall, an economics professor at Stanford University in California and chairman of the National Bureau of Economic Research committee that sets start and end dates for U.S. recessions. “I don’t see any sign of a structural shift.”

‘Substantial’ Change

Bernanke said he also saw “little evidence of substantial structural change” when he spoke at the Federal Reserve Bank of Kansas City’s Jackson Hole, Wyoming, conference last August, indicating so-called quantitative easing could help stimulate demand without a surge in inflation.

In his semiannual monetary-policy report to Congress last week, he defended the Fed’s asset purchases -- which have expanded the central bank’s balance sheet to more than $3 trillion -- as necessary to support economic expansion and accelerate job growth.

The Fed chief also repeated his special concern for people who’ve been out of work for six months or more.

“Lengthy periods of unemployment and underemployment can erode workers’ skills and attachment to the labor force,” and “could significantly reduce their productivity and earnings in the longer term,” he told the Senate Banking Committee Feb. 26.

Even though the number of people unemployed for 27 weeks or longer has dropped to 4.7 million from a peak of 6.7 million in April 2010, the total remains at triple the pre-slump amount.

Faster Rate

While Fed officials have said these workers could become unemployable, that’s not happening so far, according to an analysis in February by Rob Valletta, a research adviser at the Federal Reserve Bank of San Francisco. Those without a job for 21 months or longer are being hired at a slightly faster rate than the rate for the same group during the recession and in both its immediate aftermath and the previous three years, his research showed.

Many unemployed are “simply the victims of the severe cyclical downturn and actually have decent job prospects as the recovery proceeds,” Valletta said.

Europe’s labor nimbleness, by contrast, has been held back by restrictions on firing and by work rules such as limits on weekly hours, said Christophe Barraud, an economist and strategist with Market Securities-Kyte Group in Paris, who was the top-ranked forecaster of the U.S. economy for the two years ended in December, according to the Bloomberg forecaster data. The U.S. is “one of the most flexible markets in the world and very far from some European markets like France,” he said.

Housing Recovery

A recovery in U.S. housing, with prices rising last year, has made it easier for workers to move across states, which is helpful for people in career transitions, Barraud said. The improvement also is boosting opportunities for former construction workers who were fired after the 2002-2006 housing bubble collapsed, he said.

The Fed is counting on Americans’ ability to retain or develop marketable skills by committing to keep the target for its benchmark interest rate near zero so long as unemployment remains above 6.5 percent and inflation isn’t forecast to rise above 2.5 percent. Policy makers predict joblessness will fall to 5.2 percent to 6 percent over the long term. Before the recession, most economists estimated so-called full employment at about 5 percent, Valletta said.

St. Louis Fed President James Bullard argued against linking monetary policy directly to the jobless rate last year because of the potential for persistent unemployment similar to Europe’s, which has stalled above 9.5 percent since June 2009. As part of a presentation in Starkville, Mississippi, last month, he said there’s no indication this is happening, and he predicts the rate will fall to 7.2 percent by December.

‘Certainly Encouraging’

He displayed a chart, titled “Labor market tightness,” comparing job openings with the number of unemployed and told reporters a decline in duration is “certainly encouraging.”

Not all the reasons for less competition are hopeful. While unemployment can be shortened if people find a job or go back to school or retire, some simply become discouraged and stop searching. The number of jobless people leaving the labor force showed “a slight rise” in January from a year earlier, though reasons aren’t determined, according to the Labor Department.

The expiration of longer-term unemployment insurance last year probably contributed to some people giving up, said Gary Burtless, a Brookings Institution senior fellow in Washington.

“They have less reason to actively look for a job every week or month,” he said. “If they do not think there are any jobs available that meet their minimum conditions, it may be sensible for them to temporarily stop searching until the job market improves.”

Little Interest

At the same time, many companies “have a lack of interest” in hiring people out of work for too long, said William Dickens, professor of economics and social policy at Northeastern University in Boston and a senior fellow at Brookings. “It may take some unlearning on the part of firms.”

That could help keep unemployment “quite a bit above 5 percent, which we used to think was normal,” for years, said Laurence Ball, professor of economics at Johns Hopkins University in Baltimore and a visiting scholar at the International Monetary Fund.

“I would say the glass is 80 percent empty rather than emphasizing the 20 percent full” for the long-term unemployed, he said.

The still-sizable number of available workers keeps wages down, too. While that’s reassuring to Fed officials concerned about price stability, it also hurts incomes. Average hourly earnings rose 2.1 percent in the year ended January, compared with a peak of 3.9 percent six months prior to the recession, Labor reports show.

Spending Cuts

Moreover, progress could be slowed by the automatic federal spending cuts that began March 1. By year’s end, sequestration would reduce gross domestic product by 0.6 percentage point and cost 750,000 jobs, according to the Congressional Budget Office. The median forecast of economists surveyed by Bloomberg calls for a loss of 0.5 percentage point of GDP and 350,000 jobs. The U.S. economy expanded 2.2 percent last year.

For now, though, there’s reason for optimism. Cook, in Oklahoma, says “it was a shock” when her job at a health-care benefits provider was eliminated Oct. 29 with almost no warning. She got her new position with the trucking company through Express Employment Professionals in Oklahoma City. Under a contract with Express, she will work with the trucker on invoices and other accounting functions for four to six months.

Looking Out

Cook says she’s hoping to find longer-term employment with the trucker, though she is on the lookout for “whatever opportunities open up.”

Betsy Giernacky, 56, was “worried about my age” after losing her job last May at Allegheny Energy Inc. in Greensburg, Pennsylvania, after the company was acquired by FirstEnergy Corp. (FE:US) She found a new part-time opportunity operating a switchboard for a health-care company within six months. She’s pleased with where she’s landed, despite a pay cut to $11 from $25. “I was just very fortunate to get into my position.”

Even in parts of the country that suffered higher-than- average unemployment and plunging housing prices, the outlook has turned up. South Florida hiring is improving, said Laura Marks, chairman of Back on Track Network Inc., a faith-based career-support organization with chapters in Miami and Fort Lauderdale.

“We have seen a renewed level of activity in mid-career to middle-management roles in sales, human resources and technology,” she said.

Neal Griebling, 70, a career coach and chaplain in Pittsburgh, says while there are increased numbers of “help wanted” signs at restaurants and retailers locally, his skilled clients now are getting placed in better jobs.

“They are finding work that fits their needs and goals,” he said. “This is very slow, but there are some improvements.”

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Rich Miller in Washington at rmiller28@bloomberg.net; Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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