With unemployment stuck above 9.5 percent for the second Labor Day in a row, the levels we used to think of as normal seem a long way off.
For many years, economists have viewed 5 percent, give or take a few tenths of a percentage point, as the normal level of structural unemployment in the U.S. economy. After the last three recessions, a recovery created enough jobs to get back to that magic 5 percent level.
At the moment, the old normal looks unattainable. Hundreds of thousands of jobs appear to be gone for good in construction, manufacturing and financial services. While workers and communities try to adapt to these changes, unemployment will remain elevated.
How elevated? "There's a pretty wide difference of opinion" among economists, says Macroeconomic Advisers Chairman Joel Prakken, "but you could probably defend an argument that structural unemployment has gone up by between three-fourths and a full percentage point."
The new normal, then, might be closer to 6 percent unemployment than 5 percent. Prakken doesn't view that change as permanent, however: By 2015, his firm's forecast has the jobless rate back in the 5 percent range.
Nigel Gault, chief U.S. economist at IHS Global Insight, is less optimistic. "If you think 5 percent is normal, you're going to be waiting for a decade or so," he says. "If you think 6 to 7 percent will be what we consider normal, we've still got to wait a few years for that."
Economists list many reasons for structural unemployment, from the political to the personal.
The government has extended unemployment benefits for 99 weeks instead of the standard 26, making the job search less urgent for some laid-off workers. Conservatives have been making that an issue, but Prakken thinks it's a minor factor.
Personal factors are probably more important. Workers are slow to give up on finding jobs in their old fields, and reluctant to take a lower-paying position. Switching careers requires new skills, and training takes time.
In addition, the new job opportunity may be in a distant city. Moving becomes tougher when you own a house in a depressed real estate market.
In the St. Louis area, 58,000 jobs have disappeared in the last two years. That includes roughly 20,000 jobs in construction and 20,000 in manufacturing, and St. Louis University economist Jack Strauss thinks half of the losses in those two industries will be permanent.
That's a lot of workers to be absorbed in growing industries, like health care or business services, especially when those industries are also adjusting to big changes in the economy.
"There's a new normal because what has been driving the U.S. economy was housing and increased consumption," Strauss says. "We're not going to be led by consumption growth going forward."
But is that a cyclical or a structural change? In Prakken's view, it's mostly cyclical. He argues that the auto workers and investment bankers who lost their jobs are smart and productive, and they'll eventually adjust to the job market's new realities. "In general, people eventually decide that they can move if they have to move, or they're going to drop their wage demands," Prakken says.
Keep in mind that big structural changes also occurred in previous recessions. The defense industry shrank in the early 1990s, and the technology bubble collapsed in 2001.
The structural changes of the past two years will eventually be a distant memory, too. That's small consolation, though, to the 6.2 million Americans who have been out of a job for six months or more. To them, the new normal looks bleak indeed.
