Long-term unemployment in the US fell in July, but economists say the decline may not be the positive signal it initially appears to be.

The number of people who had been unemployed for 27 weeks or more — the official measure of long-term unemployment — fell by 64,000 between June and July to approximately 1.8 million, according to the Bureau of Labor Statistics.

Long-term unemployed workers accounted for 25.5% of all unemployed people in July, down from 27.3% in June.

On the surface, fewer long-term unemployed workers would normally suggest that the labour market is improving. However, economists say the decline may have happened for the “wrong” reasons.

Why Falling Long-Term Unemployment Can Be Bad News

A person is generally counted as unemployed only if they are actively looking for work. If someone becomes discouraged and stops searching for a job, they can leave the labour force and are no longer counted among the unemployed.

That means a decline in long-term unemployment does not necessarily mean that more people have found jobs.

Some workers may have stopped searching because they believe suitable opportunities are becoming harder to find. Others may have left the workforce for personal or financial reasons.

As a result, the fall in long-term unemployment needs to be viewed alongside other labour-market indicators.

What It Means for Jobseekers

For people who have been searching for work for months, the latest figures provide a mixed picture.

Finding a job after a long period of unemployment can become increasingly difficult. Employers may question extended gaps in employment, while workers can face financial pressure and become discouraged after repeated unsuccessful applications.

If some of the decline in long-term unemployment is being driven by people abandoning their job searches, the headline improvement does little to show whether those workers have actually improved their financial situation.

The Bigger Labour Market Picture

The July figures highlight why unemployment rates alone cannot provide a complete picture of the US job market.

A falling long-term unemployment rate is clearly positive when it reflects people moving into employment. But if workers are leaving the labour force instead, the same statistic can mask weakness underneath the surface.

For jobseekers, the more important question is therefore not simply whether long-term unemployment is falling, but whether people who have been out of work are actually finding jobs.

That distinction could become increasingly important as economists assess the health of the US labour market in the months ahead.