The future of unemployment

It’s not looking good, especially for the next few years. A recent poll of economists found that, on average, they don’t expect the U.S. unemployment rate to fall below 6% until 2013. (The unemployment rate at this writing is 9.8%.)

“Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance,” said Allen Sinai at Decision Economics.

On average the economists … expect the unemployment rate to peak at 10.2% in February. But even once the employment situation stops getting worse, economists expect recovery to come slowly. “It could take until 2014-15 before we see a 5% handle on unemployment again,” said Diane Swonk at Mesirow Financial. Persistently high unemployment could prove a political hot potato not only for the 2010 midterm elections for Congress but also for the 2012 presidential election.

Rutgers economists say the U.S. job market recovery may take seven years — to late 2017. Others say it may take more than a decade to reach the 5% unemployment rate that prevailed until the economic downturn.

The headline of a recent Wall Street Journal article says it all: “It Will Be Years Before Lost Jobs Return — and Many Never Will.”

In addition to replacing 7.2 million lost jobs [from the recession], the economy needs an additional 100,000 a month to keep up with population growth. If the job market returns to the rapid pace of the 1990s — adding 2.15 million private-sector jobs a year, double the 2001-2007 pace — the U.S. wouldn’t get back to a 5% unemployment rate until late 2017, Rutgers University economist Joseph Seneca estimated. And that assumes no recession between now and then. “Even with some very optimistic assumptions, it’s a long road back,” Mr. Seneca said.

Where will the jobs come from? As the economy grows, some companies may hire back laid-off workers. But some jobs in real estate, finance, construction and leisure industries may be gone forever.

The government and progressives are counting on “green jobs” to fill the gap, but those jobs will take several years to materialize and depend on technology advancements.

It’s also not clear that “green jobs” will be high-paying jobs, as The Washington Post noted:

The report by the D.C.-based labor think tank [Good Jobs First] notes that it’s not uncommon for workers in the green field to earn as little as $8.25 an hour. Wages at a number of wind and solar manufacturers are far lower than those at their more traditional counterparts — falling well below the income levels needed to support a single adult with one child.

Returning to The Wall Street Journal article: Economic consulting firm IHS Global Insights predicts the total number of jobs in the U.S. won’t return to pre-recession levels until 2013.

And that doesn’t account for the growth in the labor force, so it forecasts unemployment will be a painfully high 8.1% then. Getting back to the 5% unemployment rate that prevailed before the downturn isn’t anywhere in the firm’s 10-year forecast horizon. At the end of 2019, it puts unemployment at 5.75%.

To further illustrate the long slog ahead, consider that economists say that the U.S. economy would have to grow by about 4.5% in 2010 to whittle away just one percentage point from the unemployment rate, according to another article.

Twitter: RT @mitchbetts The future of unemployment: Bad news through 2014 or even beyond.

One Reply to “The future of unemployment”

  1. Would you like to know why the numbers are so whacked Mitch? If you read the following, some might come to realize that the unemployment numbers run over 30 percent? Give it a read and let me know what you think.

    The following is from the Department of Labor:

    “There are about 60,000 households in the sample for this survey. This translates into approximately 110,000 individuals, a large sample compared to public opinion surveys which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States. In order to select the sample, all of the counties and county-equivalent cities in the country first are grouped into 2,025 geographic areas (sampling units). The Census Bureau then designs and selects a sample consisting of 824 of these geographic areas to represent each State and the District of Columbia. The sample is a State-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each State. (For a detailed explanation of CPS sampling methodology, see Chapter 1, of the BLS Handbook of Methods.)”

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