The 'new normal' unemployment rate: 6.7%

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney) -- Economists used to say an unemployment rate around 5% was normal, but the recession may have changed all that.

The new norm may now be more like 6.7%, according to a paper released by the Federal Reserve Bank of San Francisco Monday.

The report comes amid much discussion about what the "new normal" should be. Unemployment has remained above 9% for 21 straight months, and economists and policymakers, including Fed Chairman Ben Bernanke, have repeatedly said it's likely to remain high through the next several years.

And that spurs experts to ask, is high unemployment a permanent economic condition, or merely a temporary phenomenon?

Experts at the San Francisco Fed say a higher rate is probably temporary, but driven by some deep-seated structural issues.

Unemployment is staying high partly because of a mismatch between workers' skills and what employers are looking for, say John Williams, an executive vice president at the San Francisco Fed, and research associate Justin Weidner.

Roughly 44% of the unemployed have been out of a job for more than six months. Their skills deteriorate and it becomes even harder to find a job.

Add to that the housing bust, which left millions of homeowners underwater on their mortgages, and it's harder for workers to relocate to places where jobs are growing more rapidly.

All those factors may have raised the "normal" unemployment rate, Williams and Weidner say.

They also point to jobless benefits, which Congress has extended from 26 weeks to 99 weeks.

While those extended benefits help struggling families get by, "they may also reduce the incentive of the unemployed to seek and accept less desirable jobs," Williams and Weidner say. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 8:30pm ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.19 -0.02 -0.09%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

Spencer has been a supporting member of the "Good Morning America" cast for the past three years. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.