Thursday, August 13, 2009

Unemployment Rate Could Take Decade to Return to 6%

From the Wall Street Journal's Real Time Economics blog:
An end to the recession is unlikely to bring any improvement in hiring in the U.S., a new paper from the Federal Reserve Bank of Kansas City argues.

The research, made available on the bank’s Web site, affirms the widely held view that hiring is unlikely to spike much even if the recession ends, as most believe is imminent, and warns things could be worse than now thought. Persistent levels of high unemployment could also change how the Fed assesses inflation pressures, with important and as yet unsettled implications for monetary policy.

Written by Edward Knotek and Stephen Terry, the paper asserts two main forces explain why something akin to a jobless recovery is likely to follow the end of the recession. First, there have been changes in the structure of the economy that make employers more reluctant to take on new hires. And second, recessions begat by banking crises tend to cast longer shadows on recoveries, depressing the pace of job growth.

The paper’s authors project what they believe will be the course of joblessness, adjusted for structural changes in the economy and the impact of the banking crisis. That path sees unemployment breaching 10% and staying there through 2011, after which it “slowly drifts” down to 8% by 2014 and 7% by 2016. Even a decade down the road, unemployment could be above 6%, the paper warns....MORE

Meanwhile, at the Journal's Deal Journal blog the headline story is:

Mean Street: Somehow, the American Dream Lives On

Mean Street columnist Evan Newmark recently left the insulated confines of Manhattan for a two-day road trip to Eastern Pennsylvania. In this fourth and final column on the economy (click here, here and here to read the other installments), he looks toward America’s future.

Meet Lauren DiCrecchio (right), age 29. She has a buzz cut, a nose ring and tattoos on both arms. She likes French rap and ’straight edge’ hardcore music, but cares neither for politics nor religion. She is America’s future–and in less than an hour’s conversation, Lauren gave me hope that the American dream will somehow live on.

Lauren works a kiosk at the giant King of Prussia Mall, selling language-education software. But that’s only a part-time gig. Her main job now is driving a FedEx delivery truck and she loves it.
Fact is - Lauren just loves working. “Forty hours is easy,” she says. Fifty, sixty hours, no problem. “Seventy is normal. But I was working 77 hours and to keep driving at FedEx, I had to cut my hours,” she says. So Lauren recently gave up her third job at the mall’s Apple store.

Across America, we debate just how much the government should tinker with the economy. Does it need trillions of dollars of intervention? Meet an industrious free agent like Lauren DiCrecchio, and you take heart. The government isn’t going to fix all our problems. We are....MORE