U.S. unemployment picture looks grim for October and beyond
With the U.S. unemployment rate hovering near the double-digits and forecast to rise sharply for the month of October, the jobless picture is looking dim for the United States.
While the economy is slowly climbing out of the depths of the latest financial crisis, unemployment rates are likely to take a number of years to return to pre-recession levels, and things could get worse in the near term before they get better.
Gallup, a polling organization, forecast that the government’s jobless rate could rise sharply for the month of October — from 9.6 percent to between 9.7 percent and 9.9 percent when it is released Nov. 5.
A closer look at the underemployment rate — the percentage of part timers seeking full time work — is also worrisome. It has not increased from 18.6 percent in mid October while the unemployment rate has risen, which is normally a good sign.
But that could also mean that some part time employees are losing their jobs and are not being replaced, or have become unemployed or dropped out of the workforce entirely, Gallup said.
For the long term, unemployment is forecast to decline, albeit at a painfully slow rate.
International Monetary Fund (IMF) Senior Economist Oya Celasun and Economist Evridiki Tsounta said the recovery in employment is likely to be slow, given the sluggish nature of the recovery in aggregate demand, which is held back by the lasting damage of the crisis on household and financial sector balance sheets.
Recovery is expected to be sluggish but will likely strengthen in 2012-13, so there are likely to be more meaningful declines in unemployment in those years and thereafter.
The IMF is less optimistic than many analysts, forecasting unemployment next year to be around 9.6 percent, while the consensus among most economists stands at 9.4 percent. It will likely drop below 9 percent in 2012 and slide to 8 percent in 2013.
That means that six years after the recession began, the jobless rate will still be much higher than it was before the downturn.
The bulk of unemployment is cyclical, due to low and uncertain demand going forward.
IMF staff analysis suggests that 1.5 percentage points of the increase in the unemployment rate is structural, due to frictions caused by skills mismatches and underwater mortgages — mortgages that leave the homeowner with more debt than the home is worth — and people not being able to move to where the jobs are, they said.
WIDENING INCOME GAP
High unemployment has also increased the poverty rate, and some experts said that points to a widening gap between the wealthy and the poor.
Recent U.S. census data showed a jump in the number of households living in poverty — defined as a family of four earning less than 22,000 U.S. dollars a year — to 14.3 percent in 2009, up from 13.2 percent the previous year. And those numbers could rise further if the economy does not turn around soon, some experts said.
At the same time, the number of millionaires grew this year. According to the Phoenix Affluent Marketing Service, the number of households with liquid assets of 1 million U.S. dollars or more grew 8 percent in the 12 months preceding June, although the figure stands at less than 2007 levels of millionaires.
“Unemployment doesn’t hit everyone equally,” said Isabel V. Sawhill, senior fellow at the Brookings Institution. “It hits people with the least amount of skills and education and experience much harder than it does the reverse. So you’d expect a recession to lead to greater inequality in income, bigger gaps, for sure.”
While high earners are not immune to the sting of recession, the impact on them is less severe, she said.
Tess Stovall, senior policy advisor at Third Way, said that unless the economy makes a significant turnaround over the next year, lower-middle class families could slip out of the middle class and into the working poor.
But even solidly middle-class families will ‘feel’ poor even if they are not technically in poverty because of the massive amount of personal wealth lost during the recession, she said.
Americans lost nearly 26 percent of their net worth during the recession, and even though the economy has picked up in the last year, Americans’ net worth is still down nearly 19 percent from pre-recession levels, she noted.
If the current economic climate persists, middle-class families will continue to struggle to get ahead and to afford traditional middle-class aspirations such as quality child care, college for their children, or a comfortable retirement, she said.
And that could widen further the income gap.
COULD BUSH TAX CUTS MAKE A DIFFERENCE?
At some point after the mid term elections in November, Congress will debate whether to extend the tax cuts implemented by former President George W. Bush, which expire in December.
The argument is over whether to leave them in place across the board, which is the wish of Republicans, or extend them to everyone except top income earners, which is what the Democrats want.
Celasun said extending the cuts for all earners as opposed to all-but-the-top-2 percent of earners would not make a big difference for unemployment, as giving top earners a bit more income has a small impact on consumption spending.
Proponents of tax cuts for everyone, however, said that taxing the upper echelon of earners could blunt investment and business expansion and prolong high levels of unemployment.
Welcome visit http://buyer.buyer-buying.com Site trade platform.France Buyer
Processing your request, Please wait....
