No Easy Road Back to Job Creation
A sluggish recovery spells little hiring, while few new jobs hinders growth -- the vicious cycle continues.
By Jerome Idaszak, Associate Editor, The Kiplinger Letter
October 2, 2009
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The latest unemployment numbers show how steep the climb ahead is for workers and the economy. Payroll jobs shrank in September by 263,000 -- a discouraging upturn after two months of declining layoffs. In August, 201,000 jobs were lost, down from 304,000 in July. What’s more, the declines were spread broadly across the economy -- in services as well as in manufacturing and construction. Even government payrolls declined, by 53,000, and the average workweek in September fell to 33 hours from 33.1.
It’s a catch-22 situation: The economy needs faster job creation to sustain a recovery; a stronger recovery is needed to expand employment. Policymakers at the Federal Reserve and in the White House hope that easy credit conditions and economic stimulus spending will nurture sufficient growth until sometime next year, when private sector hiring should turn upward. We think that’s a good bet, but the best to be hoped for is very moderate economic growth next year.
A comparison with the recoveries following other steep recessions makes it clear how much more difficult the path back to robust economic health is likely to be for many Americans this time. In 1973 and 1983, gross domestic product increased more than 6% in the 12 months after the recovery began. Payrolls expanded by about 3%. A similar trajectory in 2010 would mean payrolls growing by about 330,000 a month, or close to 4 million over 12 months. Instead, we expect a net job increase of less than 500,000 in 2010. Since the recession began in December 2007, 7.2 million net jobs have been lost.
With GDP likely to increase at no more than half the pace of those previous recessions, the unemployment rate will probably move only slightly lower next year. After rising from 9.7% in August to 9.8% in September, the rate is likely to inch higher for the next few months, climbing above 10% in early 2010, then declining gradually over the course of the year. By year-end 2010, it will still be above 9%.
Business managers remain very cautious about hiring. Although managers of big companies generally expect some economic growth in the next six months, they do not anticipate that it will be enough to spur increased investment in either plant and equipment or manpower.
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Reader Comments (1)
Posted by: Joe Honick at 10/02/2009 03:35:42 PM
As usual, this reporter pens a clear and difficult situation in easy to understand terms. All that is missing is both to assess responsibility for those largely responsible for the mess and to demand that the financial houses now blessed with massive taxpayer infusions pull back on their heavy salaries and bonuses and direct their policies to more positive assistance to borrowers, both residential and commercial. That so many irresponsible banks, mortgage brokers and others failed utterly to do their jobs of credit checking remains a potentially criminal reality. That they now choose to blame consumers for having bought beyond their means or actually lied is shameful beyond belief since the lenders had responsibilities to do something simple called credit checks as they collected their mountains of commissions merely for making loans. One hopes that the millions sucked in by these people and now without means or homes will restrain themselves from marching on those who not only acted irresponsibly but are now collecting from those whom they victimized.