Next economic problem ... joblessness

Unemployment tends to be a lagging indicator in the economy (come to think of it, that hardly makes it an indicator at all, but I digress). As the output of the economy begins to stabilize and then, with any luck, improve later this year, the employment situation is likely to continue deteriorating for some time.

Bloomberg had an excellent analysis yesterday of the labor market challenges facing the U.S. and the Obama administration. Besides rising unemployment, the article also points to the higher incidence of long-term unemployment.

The article also mentions how joblessness will depress wages and contribute to further housing woes and bankruptcies.

The U.S. traditionally hasn’t had to deal with long-term joblessness. During the last 30 years, Americans who were thrown out of work took an average 15.8 weeks to find new positions. In June, the average duration of unemployment was 24.5 weeks, the longest since records began in 1948. The number of people collecting unemployment benefits reached a record 6.88 million in the week ended June 27.

Policies that may help in the short-run include providing tax breaks to companies that add jobs and modifying unemployment insurance to provide re-employment bonuses. Longer term policies include training assistance. Of course, the most helpful thing of all will be an improving economy.