The situation left nearly two million Americans long-term unemployed

Norig Karakashian, 38 years old, an accountant in California, quit his job after a divorce. He then moved back to live with his parents to save money while looking for a new job.

Over the past year and a half, Karakashian has gone through many interview calls but was not accepted, despite having worked at many companies and having a wide network of contacts in the financial audit industry.

He is one of 1.9 million Americans unemployed for 27 weeks or more, also known as the long-term unemployed group, according to data released by the US Bureau of Labor Statistics (BLS) in July. This group accounts for 27.3% of the total number of unemployed people in the US, up 4 percentage points in a year and fluctuating near the highest level since the end of 2021.

This is the paradox in the American employment picture. While the economy has added jobs for four months and the unemployment rate fell to 4.2%, the lowest level in a year, the opportunities for those who have been out of work for a long time remain very limited.

People like Karakashian are still counted as unemployed because they are actively looking for work, unlike people who have stopped looking and are out of the labor force. The 6-month mark is also often the time when many people run out of unemployment benefits or severance pay, causing financial pressure to increase sharply.

Experts describe the current US labor market as “hard for new people to get in, old people don’t leave”. Enterprises do not massively cut staff, but are also cautious in recruiting new employees. The hiring rate has been virtually unchanged for two years and reached just 3.3% in May.

Preston Mui, senior economist at research organization Employ America, said that the number of newly unemployed people has not increased dramatically because the wave of layoffs is still under control. The problem is that hiring activity has decreased markedly, making it difficult for those who have lost their jobs to find new opportunities.

This situation has the strongest impact on the golden working age group, from 25 to 54. Of these, the 25-35 year old group both accounts for the largest number and has the highest prolonged unemployment rate.

Office workers are the group most affected. More than a third of unemployed people in the professional services sector have been without work for at least six months, and many people working in government, finance and information technology are in the same situation.

At age 38, Karakashian was initially confident that his experience and network of contacts in the accounting field would help him find a new job soon. But after a long period of failure, he is considering switching to a job as a locksmith or watch repairman.

Laura Ullrich, director of economic research at recruitment site Indeed, said that once workers lose their jobs, it will be very difficult to return, especially in office sectors with almost no growth. This situation is difficult to change if the recruitment pace does not recover.

The development of artificial intelligence (AI) increases the feeling of insecurity. When announcing large layoffs, some businesses often cite investment in AI as a reason, but the actual impact of this technology on the labor market remains unclear.

Another problem is that candidates’ skills no longer fully match the new requirements. Previously, businesses could recruit based on qualifications and then provide additional training, but now they increasingly require candidates to prove their ability to work immediately, including skills in using AI.

Forbes believes that long-term unemployment is not only a problem of underemployment, but also a gap in the career transition process. The US does not have an effective system to help workers update their skills and reconnect with businesses after losing their jobs.

The real picture is even more worrying than the unemployment figure of 4.2%. The labor force participation rate in June dropped to 61.5%, the lowest level in 50 years if the Covid-19 period is excluded.

The labor force decreased by 720,000 people in June alone, while the number of people classified as out of the labor force increased by 832,000. This shows that the unemployment rate fell partly because many people stopped looking for work, not entirely because they found new jobs.

Dan Roth, a former Amazon recruiter, lost his job in January 2023 but has yet to find a suitable position. The 41-year-old man tried his hand at consulting and volunteering to maintain his skills. His wife is currently the family’s main source of income.

“The new job must have an income higher than the cost of child care, otherwise going back to work is meaningless. The labor market right now, especially for my profession, seems to be deadlocked,” Roth said.