- Planetary alignment peaks with celestial show this weekend
- UK fighters escort Pakistan plane to airport, two arrests
- Judge rules against 'America's toughest sheriff' in racial profiling lawsuit
- Arizona jury foreman says believed Jodi Arias was abused
- Sixth night of violence in Sweden, but police say capital calmer |
U.S. job market may need 5 years to fully heal
WASHINGTON (Reuters) - The U.S. housing bust and auto sector upheaval have left hundreds of thousands of workers looking for jobs in the same sectors, in the same places, and at the same time.
Some of these jobs won't come back even after the recession ends because Americans are unlikely to buy as many new homes or cars as they did at the peak of the easy-money days.
The result is that it may be several years before the United States returns to full employment -- and even then the jobless rate may not get back to the low 4.9 percent level where it stood when the recession began in December 2007.
"I don't think we're going back there any time soon," said James Galbraith, an economist who teaches at the University of Texas' LBJ School of Public Affairs. He thinks unemployment may stay "close to 10 percent for quite a long time."
Persistently high unemployment would be problematic for President Barack Obama, who has made creating or saving jobs the measure of success for a $787 billion stimulus package.
It would also complicate policy for the Federal Reserve, the U.S. central bank, which is supposed to promote full employment and keep inflation in check. Eventually, the Fed will want to raise short-term interest rates from their current level near zero, but it will be hard-pressed to do so while the jobless rate remains abnormally high.
Unemployment normally rises in recessions. What makes the current episode worrisome is that the biggest job losses are heavily concentrated, both in terms of sectors and geography.
The worst of the auto sector job cuts are in the U.S. Midwest, and a large portion of the out-of-work home builders are in Florida and California. The areas with low unemployment include low-population states like Wyoming and South Dakota.
This suggests that not only are there too few jobs to go around, but there is also a mismatch between where the workers are and where the jobs are.
GONE FOR GOOD
Take residential construction, for example. At the top of the real estate market, housing starts surpassed 2 million. They are now running at less than a quarter of that rate, according to U.S. Commerce Department data.
There were more than 1 million people employed in U.S. residential construction in 2006. As of April 2009, that total was down to 711,000, Labor Department data shows.
Not surprisingly, unemployment is higher than the national average in states where the housing boom and bust were most severe. California's unemployment rate is 11 percent, up from 5.9 percent at the start of the U.S. recession. Florida's is at 9.6 percent, double what it was in December 2007.
While the housing market will no doubt recover somewhat, even the most optimistic observers accept that it will be quite a while before it gets back to its prior peak.
This is part of the reason why Moody's Economy.com economist Joseph Brusuelas thinks it will be 2013 or 2014 before the economy returns to full employment. The other big factor is auto manufacturing.
Employment in the motor vehicles and parts sector has dropped by more than 400,000 in the past three years, and will probably fall further if General Motors Corp (GM.N) files for bankruptcy protection, as expected, by a June 1 restructuring plan deadline the government has set.
Brusuelas estimates that for every auto job lost, five other people may be out of work, including those indirectly affected, such as restaurant employees or healthcare workers.
Many auto workers losing their jobs are likely to be men ages 50 to 65, putting them squarely in the bulge of the Baby Boom generation that is nearing retirement, Brusuelas noted.
"This will have societal impacts," he said.
COMING DOWN SLOWLY
Bringing down the jobless rate will take time and a much healthier economic growth outlook than most economists currently expect.
The overall U.S. unemployment rate has risen 4 percentage points to 8.9 percent since the start of the recession. The consensus of economists in the widely watched Blue Chip survey has the jobless rate peaking at 10 percent next year, which would earn this downturn the dubious distinction of producing the largest rise in unemployment in Labor Department records dating to 1948.
That title is currently held by the double-dip recessions of the early 1980s, when unemployment rose by 4.5 percentage points between January 1980 and November 1982.
After that episode, the job market turned around quickly. Indeed, by the end of 1983, the jobless rate had dropped by 2.5 percentage points to 8.3 percent.
But that was helped along by an economy that grew 4.5 percent in 1983. The last time the U.S. economy grew that fast was in 1999, the height of the dot-com bubble. Economists in the Blue Chip survey expect 2010 growth of just 1.9 percent.
"It is a long shot that the (Obama) administration can engineer a powerful recovery in the absence of the twin factors that have generated past recoveries -- namely, a major surge in consumer demand for houses and cars," said Roger Kubarych, an economist at UniCredit. "Neither is likely this time."
(Editing by Andrea Ricci)
- Tweet this
- Share this
- Digg this