Amidst the discussions on so-called jobless recovery that is on the horizon for the U.S. economy, the important point is missed.
The fact remains that the will be seriously retarded by the abysmal condition of the labor market. Unemployment levels are probably one of the biggest factors for the slow return of economic growth.
According to some of the latest figures, the U.S. unemployment rate is currently at 9.5% and climbing. When you include the numbers of discouraged people who have ceased job hunting and those that can only get part time work, the number jumps to 16.5%. This mindboggling figure easily explains the drastically lower consumer spending rates nationwide. This, in turn, has a domino effect on the housing and banking markets.
Looking back at the recessions in 1973 and 1981, they were followed by intense periods of new hiring only six months after the job loss rates peaked. Yet, those recessions that hit in 1991 and 2001 were far less serious than the previous ones but were followed by weaker job markets.
The idea of jobless recover came out of these periods. While it seemed the economy was getting back into shape, the number of Americans who didn’t experience this relief was higher because they did not have jobs.
The reason for this distinction has much to do with a fundamental change of the economic structure. It affected the changes in post-recession employment numbers. Other factors include a shift from the manufacturing industry to the service sector in recent years. Some analysts point to the impact of diminished union involvement on employment figures.
Chief economist at Standard & Poor’s put it this way: “Manufacturers tend to have a deeper job cuts in a downturn and they have a sharper upturn. The service sector does layoffs later but hires later, too.”
As such, many economists are forecasting that the U.S. will experience a jobless recovery as it rises from the recession that began in December of 2007. Even the Federal Reserve has noted that it has revised its annual outlook on economic growth. The central bank now predicts the economy will shrink between 1% and 1.5% in 2009, less than was previously forecast.
The Federal Reserve is predicting the economy will expand as much as 3.3% next year, a relatively weak improvement coming out of a recession. The stated reason for this prediction is that many expect that the unemployment rate will move above 10% this year and remain in the high 9% range in 2010.
The question everyone is asking is whether the economy really thrive in the face of such joblessness?
Tags: unemployed. recession, Recessions, jobs, weak improvement, federal reserve, figure, fundamental change, us economy
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