Long-Term Unemployment Rises Sharply, Signaling a Silent Jobs Recession

The U.S. long-term unemployment rate is surging at a rapid pace, surpassing all economic recessions outside of 2020 and 2008, according to the latest data from the Bureau of Labor Statistics (BLS). In August 2025, the long-term unemployed—those out of work for 27 weeks or more—stood at 1.9 million, an increase of 385,000 from the previous year. This cohort accounted for 25.7 percent of all unemployed individuals in the U.S., highlighting a troubling trend in the labor market. The rise is particularly concerning given that the overall unemployment rate remained relatively stable at 4.3 percent, masking the growing challenges faced by those who have been jobless for extended periods [1].

The August employment report also revealed that total nonfarm payroll employment changed little, adding just 22,000 jobs. This figure, significantly below the anticipated 75,000, signals a stagnation in the labor market. The modest gains in health care—31,000 jobs—were offset by losses in federal government and extractive industries such as mining and oil and gas extraction. Over the year, manufacturing has lost 78,000 jobs, and transportation equipment manufacturing has seen a decline of 15,000 positions. These data points underscore a sectoral imbalance in job creation, with traditional industrial sectors struggling while some service sectors show limited growth [1].

Mark Zandi, chief economist at Moody’s Analytics, has warned that the U.S. may already be in a “jobs recession,” given the consistent decline in hiring and job openings. The BLS reported that job openings fell to 7.2 million in August, the lowest level since September 2024 and below the number of unemployed individuals. This shift marks the first time since the end of the pandemic that the number of job openings has dropped below the number of unemployed workers. Zandi emphasized that the data suggests a significant cooling in the labor market, with lower job market tightness likely to lead to reduced wage growth [3].

The broader economic implications are equally troubling. The U.S. economy has added an average of fewer than 100,000 jobs in each of the last three months, a sharp contrast to earlier 2025’s robust growth. Arindrajit Dube, professor of economics at the University of Massachusetts Amherst, highlighted that the slowdown is increasingly pointing to a potential recession. While the exact causes remain difficult to isolate, Dube noted that current administration policies—particularly higher tariffs and restrictive immigration policies—have likely exacerbated the economic slowdown. These policies, he argued, have constrained labor supply and increased costs for manufacturers and exporters [2].

The labor market weakness has also sparked expectations for aggressive monetary policy adjustments. Investors are pricing in multiple interest rate cuts by the Federal Reserve before the end of 2025, with Zandi predicting quarter-point reductions in September, October, and December. While these cuts may provide some cushion against economic deterioration, Zandi stressed that they will not reverse the underlying structural issues. The U.S. Treasury 10-year yield dropped to a five-month low following the August employment data, reflecting heightened anticipation for accommodative monetary policy [3].

As the U.S. labor market cools, businesses remain cautious about expanding their workforce. Layoffs have remained relatively subdued, creating a temporary firewall against a deeper downturn. However, Zandi warned that this caution could give way to broader job losses if the current trajectory persists. The labor market is showing signs of vulnerability, particularly in goods-producing industries, which have been hit hardest by the ongoing economic slowdown. If the trend continues, the pain is likely to spread to professional services, retail, and even parts of the healthcare sector [3].

Source:

[1] Employment Situation Summary - 2025 M08 Results (https://www.bls.gov/news.release/empsit.nr0.htm)

[2] Something Is Not Right With America's Jobs Market (https://www.newsweek.com/something-not-right-american-jobs-market-2124667)

[3] America's job growth has flatlined—and Mark Zandi ... (https://fortune.com/2025/09/05/jobs-report-unemployment-fed-rate-cuts-recession-zandi/)