Friday, July 24, 2009

60% of Those Unemployed Can't Get a Job Within 1 Year

According to the Department of Labor, the Exhaustion Rate is:

The exhaustion rate is equal to the number of final payments in a twelve-month period divided by the number of first payments in a twelve-month period that lags the period over which final payments are counted by six months (26 weeks). For example, the exhaustion rate for December 2004 is equal to the number of final payments from January 2004 to December 2004 divided by the number of first payments from July 2003 to June 2004. When charted, the exhaustion rate is much smoother than the simple count of exhaustions because each point represents twelve months’ worth of aggregated data, much like a moving average.
As I detailed in my previous post Exhaustion Rate Underestimates the Issue, the six months was applicable when unemployment insurance was... six months. That length has shifted to 12 months in November, thus the Exhaustion Rate (as listed by the DOL) is no longer applicable. Fortunately, I crunched the numbers and voila... we have the chart below.

And it is rather frightening. Of those that received their first unemployment benefits 12 months ago, 60% were unable to get a job AND are now no longer able to collect unemployment. This is a huge reason why the continuing claims number and unemployment rate underestimates the issue.

Source: DOL