Despite the blockbuster August jobs report, the anemic pace of hiring in prior months has been exacerbating challenges for long-term unemployed Americans, new research from the Richmond Federal Reserve finds.
The long-term unemployment rate—those who are out of work for 27 weeks or longer as a share of the total unemployed—has been steadily climbing since early 2023.
Of all unemployed Americans in August, more than one-quarter (27 percent), or 1.93 million, had been out of work for a prolonged period, according to last month’s Bureau of Labor Statistics report.
This is up from 25.5 percent, or 1.77 million, in July.
Federal Reserve Chairman Kevin Warsh gave the labor market glowing marks during his keynote address at the Jackson Hole Economic Symposium last month.
With an unemployment rate hovering around 4 percent over the past couple of years, job conditions would suggest that the Fed has achieved its maximum employment mandate.
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But the situation might not be optimistic for Americans who have been out of the job market for many months.
This year’s sluggish growth in U.S. payrolls is likely to present fresh hurdles for job hunters, regional central bank researchers warn.
“In the current ‘low-hire, low-fire’ labor market—which features both slower job creation and less job separation activity (including firings and layoffs)—becoming unemployed can be particularly challenging as finding a new job can be more difficult,” the Richmond Fed economists wrote in a Sept. 1 paper.
America’s labor market has been entrenched in an environment in which employers are neither increasing headcount nor laying off workers.
Continuing jobless claims have also been on a downward trajectory since late 2025, a measurement that could signal two trends in the U.S. economy.
First, workers are finding it easier to locate job opportunities. Second, Americans have exhausted their benefits since many states cap eligibility at 26 weeks.
For a growing chorus of workers who have been searching for several months, the search may no longer be worth it, which could help explain the drop in workforce participation.
“The data have yet to show that job-finding prospects are improving meaningfully for those who have been jobless for an extended duration,” the Richmond Fed said.
“In particular, those who have been out of work for a year or more are experiencing more challenges seeking reemployment relative to the ’standard’ long-term unemployed.”
The U.S. labor force participation rate ticked up to 61.6 percent in August—from 61.4 percent in July—hovering close to its lowest level since the 1970s (excluding the pandemic).
While part of this can be explained by older workers exiting the labor market, young men are not pursuing employment opportunities.
The participation rate for males aged 16 to 24 plummeted to around 56 percent last month, from 69 percent in 2000.
Skills Shortage
But while job growth has been choppy this year, labor demand has been robust.
The challenge for employers is finding qualified workers to fill these openings.
According to the Federal Reserve’s Beige Book—a periodic report summarizing economic conditions across the central bank’s 12 districts—employment demand in the construction and manufacturing sectors was “healthy” this summer.
“Labor availability was mixed. Skilled trades and technical workers were difficult to find,” the report stated.
It is estimated that employers face a talent gap of approximately 1.3 million workers, according to an Aug. 25 report by labor market intelligence firm Lightcast.
Additionally, seven of the 10 most in-demand skilled-trade occupations—construction, electricians, and technicians, for example—already face significant labor shortages.
“The impending lack of skilled trades workers has been a resounding issue in our economy for years,” Ron Hetrick, principal economist at Lightcast, said in a statement.
The skills shortage comes at a time when the United States is witnessing a rebirth of manufacturing amid the artificial intelligence (AI) boom.
The data‑center expansion has already brought on about 315,000 additional skilled‑trade workers in the past five years, the report found.
