Explaing the Basics of Finding a Job to Economists

[Author's note: this is a comment on an article that ran on FiveThirtyEight five years ago (how the time flies!). I just found the draft laying around in the back-end of this here blog and thought "yeah, might as well post it." Better late than never, and anyway, I don't think mainstream economists have gotten any smarter in the intervening half decade.]

A website ostensibly aimed at intelligent people ran this article the other day, entitled Out of Work, Out of Luck.

As Bill Black says, it's impossible to compete with unintentional self-parody:

Economists aren’t sure why being out of work for more than six months makes finding a new job so much harder.

Really?  How about this: 'cause having a big gap in your employment history looks shitty on your resume.  Who are these "economists" and what planet do they come from?  And when is the last time they actually had to participate in our earthly labor market?

Once they cross the six-month threshold, their odds of finding a job drop off dramatically.

Know why?  The "economists" probably can't figure it out but the obvious reason is that employers (like everyone else) uses rules of thumb.  Unemployed for a couple of months is one thing, but once the magic half-year mark is crossed that gap suddenly raises red flags.  I would guess that employers, like economists, have an unconscious cut-off for acceptable absence from employment at six months.  Just a guess.

In the present, it means the long-term unemployed are, for all practical purposes, no longer part of the job market; most of them aren’t going to find jobs even if the economy improves. That means there’s less “slack” in the job market — a concept my colleague Andrew Flowers explained in more detail on Wednesday — than we might otherwise think.4 It looks like the Federal Reserve has reached the same conclusion: The Fed has been pulling back on its efforts to stimulate the economy, despite continued high unemployment and low inflation, suggesting it thinks the long-term unemployed are gone for good.5

[snip]

“The lesson I take away,” Krueger said in an interview this week, “is try to prevent the short-term unemployed from becoming long-term unemployed.”

How about this for a lesson: we need to come up with something effective to help the long-term unemployed, especially since there are likely to be ever more of them/us in the future...maybe a bailout or access to the Fed's discount window.  Re-defining the structural unemployment rate upwards is obviously not a solution.

And apparently we define slack in the labor market not as the number of people who want a job, but the number of people we can reasonably expect to get hired.  Hmmm...dubious.  I think slack is everyone who wants employment but can't find it.  A Job Guarantee program would address this, but the Fed only creates unlimited funds for banks, not the unemployed.