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Long-term unemployment fell significantly in January, continuing a downward trajectory from its pandemic-era peak after having plateaued in recent months.

The number of Americans out of work for at least six months declined by 317,000 since December, to about 1.7 million in January, according to U.S. Department of Labor data issued Friday.

The long-term unemployed accounted for 25.9% of all unemployed Americans in January, down from 31.7% the month prior.

That monthly decline (5.8 percentage points) is the largest since March 2021, when long-term joblessness began a steady descent. Until January, the share had leveled off around 32% over the three prior months.

“What we’ve seen over the last year is a steady stream of workers back into the labor force and employment,” said Daniel Zhao, a senior economist at the career site Glassdoor.

“Long-term unemployment is a reflection of that,” he added. “As the recovery marches on, more opportunities open up for workers who’ve been unemployed for a longer period of time.”

Long stretches of unemployment pose serious financial risks for households. And a big share of long-term-jobless workers can weigh on the U.S. economy.

Aside from a prolonged lack of job income, it becomes more difficult to find another job as unemployment drags on. The odds of earning a lower future wage also increase.

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Skills may get rusty and connections to the workforce (like old networks and industry friends) break down. Businesses more readily pass over resumes with a big gap in work history.

The long-term jobless are also typically ineligible for unemployment benefits. A federal pandemic-era program paying benefits to such workers ended on Labor Day (and a few months earlier in many states).

Declining long-term joblessness came on the back of an unexpectedly strong January jobs report on Friday.

The U.S. economy added 467,000 jobs last month. The Labor Department also revised its job-growth estimates for November and December much higher — there were a combined 709,000 more jobs added those two months than initially thought.

Many economists had predicted a much weaker showing due to a surge of Covid-19 cases since early December fueled by the highly contagious omicron variant.

Elevated daily caseloads led some businesses to close their doors temporarily as illness caused staffing shortages and led to reduced customer demand.  

“Job growth can plow forward in the face of pandemic headwinds,” Zhao said.

However, the labor market hasn’t yet fully recovered to its prepandemic strength. While overall number of long-term unemployed fell by about 2 million people during 2021, their ranks are still 570,000 larger than in February 2020.

The U.S. economy also remains almost 3 million million jobs short of its prepandemic mark.

“I think we are on track for a strong job market recovery,” Zhao said. “But we’re not quite at the finish line yet.”

The January jobs report showed some signs of optimism for the U.S. labor recovery, particularly for Black workers, who have been disproportionately impacted by the pandemic.

U.S. payrolls added 467,000 jobs in the first month of the new year, the Labor Department reported Friday, surprising economists who expected Covid omicron outbreaks to impact hiring. The unemployment rate held fairly steady at 4% in January versus 3.9% in December.

For Black workers, the unemployment rate dipped to 6.9% last month from 7.1%. What’s more, the Black labor force participation rate rose to 62% in January — the same as white workers.

“We’ve seen this really encouraging closing of the Black-white labor participation gap, and it appears to have fully converged,” said Bradley Hardy, an economist at Georgetown University. “This is very much a result of the Black labor participation rate rising on a gradual basis, really throughout this pandemic over an almost two year period.”

The labor force participation rate “can oftentimes be a proxy for optimism and willingness to participate in the labor market,” Hardy said. “The fact that that’s actually a gap that is — for now, at least — closed is quite important.”

The improvement in unemployment was felt most acutely by Black women, whose unemployment rate fell to 5.8% last month from 6.2%.

The drop in the Black female unemployment rate in January comes after Black women were the only race and gender group whose unemployment rate worsened in December.

The month-to-month economic readings for Black women and other minority groups can be particularly volatile due to smaller population size, according to Elise Gould, senior economist at the Economic Policy Institute.

“The longer-term story is that Black workers have remained at an unemployment rate about twice as high as white workers and white workers’ unemployment rate is far lower than Black workers have ever experienced,” Gould said. The white unemployment rate was 3.4% in January.

Hardy also recommended looking at data over a two- to three-month basis.

“It’s cautious optimism that … the trend is continuing to head in the right direction. It’s good news,” Hardy said. “But at the same time, I think we have to remain vigilant about how we interpret the trend.”