Study Predicts Lower Unemployment in ‘10
The “jobless recovery” may soon turn into an economic recovery that includes moderate employment growth. According to the November 2009 Outlook from the National Association of Business Economists (NABE), the official U.S. unemployment rate should peak in Q1 2010.
However, beginning in Q2 2010, the NABE study predicts U.S. employers will begin adding jobs, which will ease the U.S. unemployment rate. In October 2009, the official U.S. unemployment rate jumped from 9.8% to 10.2%, marking its highest reading since April 1983. During the month, the economy shed 190,000 non-farm payroll jobs. Since the official start of the economic recession in December 2007, the U.S. unemployment rate has more than doubled from 4.9%, and the number of unemployed persons has increased more than 100%, from 7.5 million to 15.7 million.
Although economists surveyed by NABE predict U.S. employers will begin hiring next year, they do not foresee an immediate turnaround. Sixty-one percent predict unemployment will not return to pre-recession levels until 2012, and the consensus is that unemployment will remain above 9% throughout 2010. In addition, the study pegs the federal deficit as the largest concern facing the U.S. economy, with unemployment coming in at number two.
NABE’s predictions of an improved unemployment situation next year, however slight, follow the moderate optimism of the Employment Trends Index (ETI). The ETI is a private index released by The Conference Board which aggregates a variety of labor market index and purportedly leads the official unemployment figure by about two months.
In October 2009, the ETI rose from 88.5 to 89.3, signifying more jobs. The 0.9% rise in the ETI marks its second straight increase after declining every month between January 2008 and April 2009. The ETI remained essentially flat from May – August 2009 after 20 straight months of decline. Since August 2008, the ETI has declined by about 15.%.
Gad Levanon, senior economist for the Conference Board, said the employment market has turned a corner and job losses should end in early 2010. However, Levanon said employers will not start hiring new employees right away “While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase,” said Levanon.
However, the official unemployment figures released by the Bureau of Labor Statistics give less reason for optimism about next year’s job situation. Looking beyond the official 10.2% unemployment number, many more Americans are unable to find work than those counted in that figure. The civilian labor force participation rate, which is the proportion of the non-institutionalized civilian population age 16 and older serving in the labor force, declined from 65.2% to 65.1%. This figure stood at 66% in December 2007. The employment-population ratio, which measures the ratio of employed persons to the total non-institutionalized civilian population age 16 and older, dropped from 58.8% to 58.5%, and stood at 62.7% in December 2007.
Several other pieces of unemployment data also show continuing problems with the U.S. job situation. These include:
- The number of employed persons working part-time for economic reasons rose 1%, from 9.2 million to 9.3 million.
- About 2.4 million persons were marginally attached to the labor force, an increase of 736,000, or 44.2%, from 1.66 million persons in October 2008. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.
- Among the marginally attached, there were 808,000 discouraged workers, a 66.9% increase from 484,000 discouraged workers a year earlier and 33.6% of total marginally attached workers. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The other roughly 1.9 million persons marginally attached to the labor force in October had not searched for work in the four weeks preceding the survey for reasons such as school attendance or family responsibilities.
The NABE study is based on a survey of 61 economists between October 24 and November 5, 2009.