The Job Market Is Worse Than You Think

An unemployment rate of 5% is low by historic standards. But the number of people out of work for long stretches is rising dramatically.

Ahead of Friday's January employment report, there is a lot of concern about the weakening job market, even as the unemployment rate stands at a relatively modest 5%.

The Federal Reserve cited evidence of a "softening in labor markets" when it announced both of its rate cuts this month. Congress is rushing to pass a $150 billion stimulus package that the Bush administration said should add 500,000 jobs to the economy.

The worries about the job market are widely shared on Main Street, Wall Street and inside the beltway.

The Conference Board's latest consumer confidence survey found that twice as many people believed there would be fewer jobs available six months from now than those who expected more jobs.

And a survey conducted for Fortune magazine from earlier this month found that just over one in four Americans are somewhat worried or very worried about losing their job in the next 12 months.

Economists surveyed by Briefing.com are forecasting that the unemployment rate will remain at 5% in Friday's report. However, it's worth a reminder that this is up from just 4.7% in November. And economists expect an addition of 70,000 jobs in the month, only a modest increase.

But the jobs numbers may be even worse than they first appear. That's because the number of Americans who have been out of work for six months or longer is on the rise.

Harder to find a new job The number of long-term unemployed stood at a seasonally-adjusted 1.3 million in December, up about 22 percent from year-earlier levels. The full-year average for 2007 was 1.2 million long-term unemployed, nearly double the reading for 2000 -- just before the last recession.

What happens to the long term unemployed? Are they still counted when the rate is calculated? The answer is no. Once you are off the unemployment rolls you are no longer considered when doing the statistics. What about those who are underemployed? How many of us have seen middle aged men now working as cashiers in the local grocery store? I know I have seen it often here in NY. Whether it is a second job to meet the bills or a stop gap measure to keep food on the table, it is not a good sign for the middle class who are being decimated.