07 September 2009

No Labor on Labor Day

A rather grim assessment of the job market on Labor Day:
'-- The unemployment and "underemployment" rate is 16.8 percent -- this includes the officially unemployed plus all part-time workers who'd prefer full-time jobs, as well as discouraged and demoralized job-seekers who have stopped looking for work. ... What's most ominous is not today's job market; it's the outlook. After the 1981-82 recession, unemployment dropped steadily from an annual average of 9.7 percent in 1982 to 7.5 percent in 1984 and 5.5 percent in 1988. The descent this time is expected to be much slower. In 2014, the unemployment rate will still average 7.6 percent, forecasts IHS Global Insight, which predicts a peak of 10 percent early next year. Reducing unemployment requires an economic expansion fast enough to absorb today's jobless plus the natural growth of the labor force. Most forecasters expect a tepid recovery will only gradually dent unemployment, despite slowing labor force growth. "The 1982 recession was largely caused by the desire to break the back of inflation," says economist Nigel Gault of IHS. "Once the (Federal Reserve) was comfortable it had broken inflation, it lowered interest rates, and economic growth took off." Interest-sensitive sectors -- autos and housing -- propelled recovery. By contrast, today's slump results from financial crisis, Gault says. The Fed has already cut interest rates, which will probably go up. As overborrowed households repay debt, their spending will be sluggish. The weak recovery then retards new jobs.'

The data in the article are backed by the September 4 release from the Bureau of Labor Statistics. At best, we may be seeing a very slow recovery - at worst, a jobless one.

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