Another ‘jobless recovery’ expected
More layoffs are permanent
WASHINGTON — Even as the nation’s economy begins clawing its way out of the worst recession in 60 years, there are growing signs that this recovery could come with an unsettling twist: The wheels of commerce may begin to turn again without any substantial boost in jobs.
Not only is the national unemployment rate, now 9.5 percent, likely to climb into double digits later this year, it is expected to remain there well into 2010, economists say. That would prolong the misery of the unemployed, squeeze retailers and other businesses, and add millions of dollars in government costs and lost productivity. It could even threaten the recovery itself.
While it’s common for the jobless rate to keep climbing for a time after economic output turns positive, the aftermath of the last two downturns, in 1990-91 and 2001, introduced the idea of a “jobless recovery.” Even though the economy improved, many unemployed workers found that jobs as good as the ones they had lost were almost impossible to find.
This time, many economists say, there are new factors that could make the problem worse. Many more layoffs in this recession have been permanent, not temporary.
And mass layoffs are continuing at a record pace; in June they cost 467,000 workers their jobs. Since the recession began in December 2007, the U. S. economy has shed more than 6 million payroll jobs.
Also, instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes, such as General Motors and Chrysler shuttering hundreds of dealerships and Citibank and Bank of America cutting tens of thousands of positions.
In addition, workers who survived job cuts are, on average, working fewer hours per week than ever before, according to Labor Department statistics. That means employers, even after they feel confident enough about the recovery to expand, will begin by giving more hours to existing employees instead of hiring new ones.
More troubling still is the outlook for consumer spending, the main driver of the U. S. economy. If people don’t spend, many businesses simply won’t have the means or the need to hire employees.
Indeed, the depth of this recession, plus widespread expectations that unemployment will keep rising into 2010 and remain high thereafter, may exert a powerful drag on the recovery.
Shortly after the 1990-91 recession, consumers went out and bought houses, cars and other expensive goods on credit, noted Richard Curtin, director of the University of Michigan consumer sentiment survey.
That helped boost job growth in construction, manufacturing and other industries.
But this time around, because of the severe credit crunch, people won’t be able to get financing as easily, while many others who can borrow will be reluctant to do so, Curtin’s surveys indicate.
Instead of leading the way to a more vigorous economy, consumers are saying they want to save and keep their personal debts low. Americans socked away almost 7 percent of their after-tax income in May, the highest rate in 15 years.
“What this means is that we’re going to have a slow-growing consumer sector,” Curtin said. So even though the federal government’s stimulus spending is likely to pick up some of the consumption slack next year, he said, “spending is expected to slow down in 2011 and disappear in 2012.”
Analysts say there are factors that could mitigate the jobless recovery. Health-care and government employers are expected to continue hiring. Green industries are emerging and will need more people.
What’s more, companies today aren’t seeing the kind of sharp gains in productivity that previously allowed them to expand output without adding workers; so this time, if a company wants to produce more, it may have to hire more workers.
And, with wages depressed because more people are unemployed, adding to the work force will be cheaper. Many employers already have cut to the bone.
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