The Federal Reserve Bank of Richmond today released its 2010 Annual Report, which features the essay "The Rise in Long-Term Unemployment: Potential Causes and Implications."
What accounts for the dramatic rise in long-term unemployment during the 2007-09 recession, and why does it remain so high? What tools do policymakers have to address it? These important questions are asked by Richmond Fed economists Andreas Hornstein and Thomas Lubik in the Bank's 2010 Annual Report. The authors analyze the potential causes of the increase in long-term unemployment and explore why the likelihood of finding a job decreases the longer a worker is unemployed. The authors find that more workers with inherently low job-finding rates have become unemployed, which suggests that monetary policy may have a limited effect on reducing the incidence of long-term unemployment. The authors also discuss what lessons might be drawn from efforts to increase the flexibility of labor markets in Europe.
The Richmond Fed's Annual Report also includes reports on the region's economy and the Bank's operational and financial activities. And it takes a special look at the Bank's partnerships with community and business groups throughout the region.
The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.