By the Numbers—The U.S. Unemployment Picture

The surprisingly weak U.S. jobs report in March showed that the U.S. has not fully turned the corner on job growth. Non-farm payrolls rose by 120,000, the worst performance in more than a year. This slow recovery is not unexpected after a financial crisis, and there are many other bright spots in the economy. However, some argue that the unemployment numbers are actually worse than reported—an ongoing controversy not likely to be resolved in the near future.

"The 'controversy' stems from the fact that the official unemployment rate, which has always excluded those who have dropped out of the labor force (they've given up on finding a job, gone on disability, etc.), would be much higher if it included them," says J.P. Morgan Funds' Market Strategist Andrew Goldberg. Because unemployment claim statistics don't pick up the long-term unemployed, some believe the employment picture in the U.S. is actually much worse than the one presented by Department of Labor (DOL) statistics. While this argument may hold some water—the U.S. labor market still has a way to go before it completely recovers from the financial crisis—it misses out on some truly positive trends at work.

For one, the "millennial" generation (ages 25 to 34), continues to experience high labor force participation at 81.9%. An analysis by the think tank Demos argues that "While the March jobs report did not bring the heralded 200,000 new jobs for which we had hoped, it does support a positive trend that puts our young adult work force back in business." The high participation rate of the millennials is a healthy harbinger for the years ahead.

Moreover, looking closely at the state of long-term unemployment in the U.S. reveals some interesting comparative trends. The research paper, "New Evidence on Cyclical and Structural Sources of Unemployment" , written by a group of IMF and academic economists, examines long-term unemployment in an international context. In this paper the U.S. comes out looking good by comparison. European countries "persist" in their unemployment much longer than the U.S. In addition, the peak of unemployment in Europe comes six years after an initial shock, as opposed to only two years in the U.S.

This is not to say that long-term unemployment in the U.S. after the financial crisis was not a problem for both those afflicted and the wider economy. As the paper notes, the duration of unemployment in the U.S. was unusual, averaging 30 weeks or more. But there were specific reasons why, which should not spell doom for the U.S. going forward. In essence, the crisis decreased the size of certain industries and workers had to move to completely new sectors rather than just wait for their own industry to rebound. As the authors write, "Permanent shocks motivate reallocation of labor across industries…and such reallocation is going to take time." If the past is any guide, the U.S. is uniquely adept at developing new industries and finding new sources for employment.

Figuring out the most efficient way to channel the long-term unemployed (or underemployed) into industries that need them remains a policy challenge. But the disappointing recent employment news shouldn't distract investors and planners from the long-term fact that the U.S. labor market still exhibits unusual flexibility and mobility—certainly when compared to Europe. This should make the U.S. uniquely well positioned to solve its unemployment problem.