Home > News > Unemployed & in Search of the American Dream

Comments 0 Comments
Advertiser Disclosure


Shhh….The worst part of the Great Recession wasn’t the housing bubble. Or the loss of retirement savings. No, the dirty little secret about America’s most recent economic calamity is the massive surge of long-term unemployment that has struck the American workforce, and remains a scourge on the nation. Even with the economic recovery well under way, the long-term unemployment rate remains higher than any time before the recession, dating back to 1950, when the Fed began counting such data.

Fully one-third of the unemployed have been out of work for more than six months, according to the Fed.

Yet even the unemployed are holding on tight to the American Dream, according to Credit.com’s American Dream Survey. In fact, America’s recently unemployed adults don’t feel any less optimistic about their ability to achieve the American Dream than the general population, the survey suggests.

Long-term unemployed face special problems, however. Research has shown they are much less likely to get job interviews, making their climb out of the recession’s hole that much harder. Many in the group stop looking, and thus are no longer counted in what’s known as the “headline unemployment” rate. That’s one reason the unemployment rate seems to be going in the right direction, but the “employment rate” – the percentage of adults an economy employs — is staying stubbornly flat.

Sometimes called the “employment-population” ratio, the employment rate is a more comprehensive measure of how the economy is doing, some researchers believe. It fell below 60% in March 2009, according to the Bureau of Labor statistics and has remained incredibly stubborn since then, vacillating between 58 and 59% ever since (it sits at 59% in June).

Employment-Population Ratio

An aging, retiring workforce is part of the explanation, economists warn — but so is long-term unemployment. During the recession, the six-months-or-longer unemployed rate peaked at 48% in April 2010 — one out of every two folks who lost their job then remained out of work for at least six months. For context, during the peak of the 1980s recession, in May 1983, the rate was 27%.

The Credit.com American Dream survey took a slightly longer view of this phenomenon, and the data are consistent with government data about long-term unemployed. We asked respondents if they’d been unemployed at any time during the past 36 months. Slightly more than 40% said they had been. Of that group, 28% said they had been unemployed more than once, and 60% said they were out of work for longer than 12 months.

Remarkably, this group’s economic dreams weren’t dampened much by their plight.

Among the unemployed, 43% said the American Dream was still within their grasp, compared to 49% for the general population. Among both groups, 16% said they’d already achieved the American Dream.

St Louis FedThe group isn’t any more pessimistic about others, either. Among both groups, only 21% say the Dream is reachable for others, and about one-third of both groups say it’s within reach for Millennials (32% for unemployed vs. 33% for employed).

The unemployed and employed define the American Dream almost exactly the same way — retiring financially secure (34% vs. 36%), being debt-free (24% vs. 25%) or owning a home (18% vs. 17%).

Is It Really Within Reach?

Where there exists some optimism among the long-term unemployed respondents for their own future, however, the reality is troubling — at least for the time being. The challenges faced by the long-term unemployed were explored in a paper published in 2012 by Rand Ghayad, a visiting scholar at the Boston Fed. Ghayad sent out thousands of fake resumes and controlled for all factors to see if those who’d been without a job for six months face discrimination in hiring. They did. Companies preferred workers with no related experience to long-term unemployed with directly relevant job experience. In other words, even if you are the most qualified applicant, you probably won’t get the job if you’ve been out of work for more than six months.

This kind of unemployment has potential long-term impacts for the economy — we might already be living through them. Generally, there should be a tidy relationship between job openings and the employment/unemployment rate, something known as the Beveridge Curve. That makes sense — job openings should soak up unemployed people. When the Beveridge Curve breaks, as it did in the 1980s, many folks assume there is a skill gap. Unemployed folks don’t have the skills to fill open positions. That theory makes sense when you see a big economic shift, such as from blue-collar to white collar jobs. Then, unemployment is a structural problem that might be solved by sending workers to school. Such a shift shows up in the data; there’s a flood of folks with blue collar experience who can’t get job interviews, using the example above.

This is why Ghayad’s research was troubling. In his data, even controlling for all sorts of experience, the six-months-unemployed-and-you’re-out factor remained in effect. In other words, this structural problem can’t be solved by taking a few classes.

It *might* be solved by human resources departments realizing that long-term unemployment is nothing special. In fact, it’s perfectly normal. But as long as the employment rate remains stubbornly low, and the number of resumes per job application remains high (250 per job, according to one estimate), HR departments will keep looking for ways to quickly screen the pile. Chucking the long-term unemployed is an easy, perfectly legal way to do that.

For now, however, it seems the long-term unemployed haven’t chucked their American Dream. They might be right in the end. The number of job openings in the U.S. economy climbed in June, and while the Beveridge Curve remains out of whack, some economists see signs of a return to normal. That would meant the Great Recession, while a creating deep wound, is starting to heal – and with it, so is the American Dream.

More on Credit Reports and Credit Scores:

Image: Wavebreakmedia Ltd

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team