Reasons for the recent rise in long-term unemployment

Question

Kroft et al document the raise of long-term unemployed in the US during the recent crises. This is an impressive figure from their paper:

They show that the raise does not come from compositional effects. However, they cannot find the reason for this phenomenon. For some reason, apparently, long-term unemployed are less likely to find a job, and hence their stock accumulates.

Potential reasons I could think of are

• Human capital deterioration
• Discrimination of employers
• Shrinking motivation of searching

What other reasons does the literature find? Is there empirical support for any of this?

Answer 1

I would "advise" to wait... a few more years! From the figure you provided, there is a perhaps slow but visible rising trend (with business-cycles-like "seasonality") for both the long-term and the mid-term unemployment rate, a fairly stable trend in terms of steepness over 60 years. The sudden peak of long term unemployment in 2009 is impressive but it also fell sharply in the next three years. To me, it appears critical to know the unemployment rates for the next four-five years, in order to decide whether we have a structural break with the historical rising trend becoming more steep, or just a few-years-incident due to the crisis.