High jobless rates could be the new normal

Discussion in 'Economics' started by WallStWhizKid, Oct 20, 2009.

  1. http://www.msnbc.msn.com/id/33384835/ns/business-stocks_and_economy/

    WASHINGTON - Even with an economic revival, many U.S. jobs lost during the recession may be gone forever and a weak employment market could linger for years.

    That could add up to a "new normal" of higher joblessness and lower standards of living for many Americans, some economists are suggesting.

    The words "it's different this time" are always suspect. But economists and policy makers say the job-creating dynamics of previous recoveries can't be counted on now.

    Here's why:

    The auto and construction industries helped lead the nation out of past recessions. But the carnage among Detroit's automakers and the surplus of new and foreclosed homes and empty commercial properties make it unlikely these two industries will be engines of growth anytime soon.

    The job market is caught in a vicious circle: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring.

    Many small and midsize businesses are still struggling to obtain bank loans, impeding their expansion plans and constraining overall economic growth.
    Higher-income households are spending less because of big losses on their homes, retirement plans and other investments. Lower-income households are cutting back because they can't borrow like they once did.
    That the recovery in jobs will be long and drawn out is something on which economists and policy makers can basically agree, even as their proposals for remedies vary widely.

    Retrenching businesses will be slow in hiring back or replacing workers they laid off. Many of the 7.2 million jobs the economy has shed since the recession began in December 2007 may never come back.

    "This Great Recession is an inflection point for the economy in many respects. I think the unemployment rate will be permanently higher, or at least higher for the foreseeable future," said Mark Zandi, chief economist and co-founder of Moody's Economy.com.

    "The collective psyche has changed as a result of what we've been through. And we're going to be different as a result," said Zandi, who formerly advised Sen. John McCain, R-Ariz., and now is consulted by Democrats in the administration and in Congress,

    Even before the recession, many jobs had vanished or been shipped overseas amid a general decline of U.S. manufacturing. The severest downturn since the Great Depression has accelerated the process.

    Many economists believe the recession reversed course in the recently ended third quarter and they predict modest growth in the nation's gross domestic product over the next few years. Yet the unemployment rate is currently at a 26-year high of 9.8 percent — and likely to top 10 percent soon and stay there a while.

    "Many factors are pushing against a quick recovery," said Heidi Shierholz, an economist at the labor-oriented Economic Policy Institute. "Things will come back. But it's going to take a long time. I think we will likely see elevated unemployment at least until 2014."

    'I do think it's going to be a long time'
    At best, many economists see an economic recovery without a return to moderate unemployment. At worst, they suggest the fragile recovery could lose steam and drag the economy back under for a double-dip recession.

    "We will need to grind out this recovery step by step," President Barack Obama said earlier this month.

    Obama and congressional Democrats are having a hard time agreeing on how to keep the recovery going and help millions of unemployed workers — short of another round of stimulus spending amid rising voter alarm over soaring federal deficits.
    So far, they've been unable to win even a simple three-month extension of unemployment insurance for people in states with jobless rates above 8.5 percent.

    The extension easily passed the House earlier this month but is bogged down in the Senate over disputes over which states would get the funds. Hundreds of thousands of people have already lost their benefits or are about to lose them.

    The White House credits the president's $787 billion stimulus plan passed in February for keeping job losses from becoming even worse. Since Obama took office in January, the economy has lost 3.4 million jobs.

    Republicans argue that the stimulus program has not worked as a job producer and is a waste of tax money. And last week, the U.S. Chamber of Commerce launched a multimillion advertising campaign to celebrate small business entrepreneurs — and to argue that further government intervention will not spur permanent job growth.

    Chamber leaders called for creation of more than 20 million new private-sector jobs over the next decade, saying it's needed to replace jobs lost in the recession and to keep pace with population growth.

    "The government can support a few jobs in the short-run" while free enterprise is the only system that can create 20 million of them, said Thomas Donohue, the chamber president.

    To many economists, such a goal seems unreachable given today's altered economic landscape.

    "It's a new normal that U.S. growth is going to be anemic on average for years. Right now, the prospect is bleak for anything other than a particularly high unemployment rate and a weak jobs-creating machine," said Allen Sinai, president of Decision Economics Inc. He says he doubts that unemployment will dip below 7 percent anytime soon.

    Many economists consider a jobless rate of 4 to 5 percent as reflecting a "full employment" economy, one in which nearly everyone who wants a job has one. After the 2001 recession the rate climbed to 5.8 percent in 2002 and peaked at 6.3 percent in 2003 before easing back to 4.6 percent for 2006 and 2007.

    Will unemployment ever get back to such levels?

    "I wouldn't say never. But I do think it's going to be a long time," said Bruce Bartlett, a former Treasury Department economist and the author of the book "The New American Economy: The Failure of Reaganomics and a New Way Forward."

    "The linkage between growth in the economy and growth in jobs is not what it was. I don't know if it's permanently broken or temporarily broken. But clearly we are not seeing the sort of increase in employment that one would normally expect," said Bartlett
  2. There's a glut of stupid morons in this country (USA), who says a lot of them are even qualified for a real job anyways??

    I was tired of workers "expecting" a tip no matter how bad the service was or the check out people who don't even say hello to the customer and a lot of time don't even look you in the eye. Too much entitlement and not enough effort.
  3. Lethn


    Stupid retards, don't they know it's because they only bailed out their wallstreet and bank buddies that people are in this situation in the first place? I admit there are people out there I just laugh at when they blame the recession for their problems because they're in either massive amounts of debt or their company is run absolute crap. There are however people like me who are perfectly willing and actually WANT to work hard that can get fuck all jobs just because some dolt spent all their time obeying a teacher no matter how stupid it seemed and didn't learn any actual skills going through their education to boot.

    I refuse to censor my own swearwords by the way as this deserves it and yes a true free market would be the answer the only thing corporatism does is help the corporations which is why you see Goldman Sachs employees still getting paid bonuses even though they haven't paid the taxpayer back yet.

    I really hope I can get into this vocational course that I'm doing so I can get a job because once I do I'll laugh at lazy asses like them who think they can get a job just by waiting for a lousy piece of paper that has a government stamp on it.
  4. maxpi


    Russia had full employment and free health care. Join the Obamanation and march proudly into the future.. Obama is the true representative of the people.. bow to the Great One...
  5. High Unemployment is good for companies because it means they can increase margins by cutting employee costs. And by high unemployment they can depress wages as well which is a net positive for companies.

    Another reason why the markets are going up.
  6. Regularly happened in Germany when unemployment was 11 % + x. Should work in the US, too.