There had been a fair amount of buzz around the idea that the budget mini-deal being hashed out between Paul Ryan and Patty Murray might include some extra money to extend unemployment insurance benefits for the long-term unemployed. But Republicans didn't like the idea, and Democrats didn't want to bust up the deal over it, so now folks who've been jobless for an extended period of time are going to lose their benefits at the end of the year.
One consequence of this is that the unemployment rate will almost certainly go down, since some fairly substantial fraction of the long-term unemployed will just stop looking for a job and drop out of the labor force. If you're long-term unemployed, then almost by definition looking for work has not been very successful at getting you work. What it has gotten you is a UI check. Take away the check, there's no point in bothering, and so the denominator in the unemployment rate falls and thus the unemployment rate falls.
The bad news is that the long-term unemployed are screwed.
In effect, when companies are looking to hire people, they scan through the résumés they get in the mail and their first step is to throw out all the résumés of people who've been unemployed for a long time. This is research based on pretty well-designed experiments that control for other variables beyond long-term unemployment. You should feel free to see that as a vile form of discrimination, or as a sensible business heuristic according to your temperament. The point is that the people who are about to lose UI benefits are not going to be able to find jobs. Not today, not after they lose benefits. In fact, they probably won't be able to find jobs ever.
Mailing unemployment insurance checks to people who aren't so much unemployed as unemployable is obviously not an ideal public policy. But simply doing nothing for them is cruel and insane. The time-tested way of re-employing a large mass of long-term unemployed is to fight a major world war with Germany and Japan. The circumstances of mobilizing for major armed conflict in 1940–42 proved that when you really want to put people to work, it can be done. So it's always possible that the Senkaku Islands will come to the rescue. But large-scale armed conflict has a lot of offsetting negative consequences. What we need are targeted "mobilization" programs that don't rely on the outbreak of an enormous war. That would take, I think, two major forms.
One is direct government hiring of the long-term unemployed to do some kind of public service work. Making this happen would require you to go outside the standard civil service and federal contracting frameworks, which obviously neither civil servants nor federal contractors are going to like. But it has the job-creating punch of a major war without all the death and destruction. The other is relocation assistance. The metropolitan areas of Bismarck, Fargo, Grand Forks, Sioux Falls, Ames, Iowa City, Lincoln (Neb.), Midland, Burlington, Mankato (Minn.), Logan, Rochester (Minn.), Billings, Dubuque, Morgantown, Odessa, Rapid City, Omaha, Waterloo (Iowa), Columbia (Mo.), and St. Cloud all have unemployment rates below 4 percent. Those are the kind of places where the labor market is tight enough that discrimination against the long-term unemployed shouldn't be a major factor. There's work to be done in these towns, and evidently most people are reluctant to move to small isolated cities in extremely cold locations (also Midland, which isn't cold). Grant programs to connect the long-term unemployed with job opportunities on the Plains and offer financial assistance for relocation could do a lot of good.
Alternatively, we could keep paying UI checks.
But we're not going to do that. And we're not going to do relocation assistance. And we're not going to do direct hiring and public works. We're going to do nothing. We're going to tell people to go out and look for work, even though employers looking to hire can still afford to be very choosy and generally refuse to even consider the long-term unemployed as job applicants. The country failed these people first by letting the labor market stay so slack for so long that they became unhirable, and now we're going to fail them again.
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