Right now, unemployment is mainly the result of what economists
call cyclical factors: during the recession, demand plummeted,
and during the recovery consumer spending, government stimulus,
and exports haven’t been sufficient to make up the difference.
But if high long-term unemployment continues there’s a danger
that, sooner or later, cyclical unemployment could become
structural unemployment—that is, unemployment that won’t go away
once the good times return. The longer people are unemployed,
the harder it is for them to find a job (even after you control
for skills, education, and so on). Being out of a job can erode
people’s confidence and their sense of possibility; and
employers, often unfairly, tend to take long-term unemployment
as a signal that something is wrong. A more insidious factor is
that long-term unemployment can start to erode job skills,
making people less employable. One extraordinary study of
Swedish workers, for instance, found that there was a strong
correlation between time out of wo