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Jobs: Get Ready for a Rebound

Unemployment will peak soon, but it will take years for the labor market to fully recover.

In 2010, look for a sign of prosperity that we haven’t seen in years. It reads “Now Hiring.” The first quarter of 2010 will mark a turnaround in the labor market, as unemployment peaks at around 10.5%. Finally, we will see net job gains this year. But make no mistake: A full recovery is years away.

More than seven million jobs have vaporized since the start of the fierce recession of 2007-09. Some 27 million Americans are unemployed or under-employed, including those who’ve given up looking for a job and those working part-time when they’d prefer full-time employment. A law passed in November extended jobless benefits by another 14 weeks for people whose checks would have otherwise run out, and by 20 weeks for people in more than two dozen states with unemployment above 8.5%, including California, Florida and New York.

Nationwide, the unemployment rate won’t fall back below 6% until at least the end of 2012-and, probably, later. “When you’re starting at over 10%, it takes a lot of growth to whack that down,” says economist Michael Montgomery, of IHS Global Insight. In 2010, we expect the economy to grow at a moderate 2.5% to 3% rate, on average.

There are signs that we’re moving in the right direction. A recent survey of the National Association for Business Economics found that the percentage of firms adding jobs doubled from an all-time low of 6% in July to 12% in October. Temporary-help services, typically among the first labor groups to turn positive in a recovery, added 34,000 jobs in October. Through September, employers had announced plans to hire nearly 170,000 workers-more than were hired in all of 2008, according to outplacement firm Challenger, Gray & Christmas. The government and nonprofit sectors announced 28,500 openings. A recent survey by ExecuNet found that headhunters expect the most high-level job opportunities to be in health care, green technology and energy.


Regionally, look for strength in West South Central states-Arkansas, Oklahoma and Texas-buoyed by oil and other natural resources and by more-resilient housing markets. The Midwest Plains states-the Dakotas, Montana, Nebraska and Wyoming-with stable farming and reserves of natural resources, will enjoy some of the lowest unemployment rates in the country, according to IHS Global Insight. Only eight states will see unemployment below 7% by year-end, including North Dakota, at 4.8%. Maryland and Virginia, bolstered by high-tech, will finish 2010 at 6.7% and 6.4%, respectively.

Despite some firming in factory orders, midwestern manufacturing states will continue to struggle, as will states hit hardest by the housing bust. Sixteen states will finish the year with unemployment rates above 10%; Michigan could hit 15%, and California, 12%.

If you’re lucky enough to have a job, don’t look for much of a raise. Salaried workers can expect a 2.6% bump this year, according to Hewitt Associates. Energy companies will be among the most generous (3.7%), while industrial machinery and equipment companies expect to pay just 1.6% more.