In August 2009, the International Monetary Fund declared that the world recession was over and that the leading economies in the world were beginning to show signs of growth. Yes, the United States (US) economy grew in the third quarter of 2009, for the first time in a year. In fact, fewer Americans filled out new claims for unemployment insurance, and giant financial institutions appear less likely to collapse. Moreover, the stock market recovered from much of its winter decline in 2008.

 Despite these reassurances of an economic recovery to date, there is still no sign of an employment turnaround, and without one, and soon, all the other gains could prove insignificant. To be more specific, the US unemployment rate rose above 10 percent for the first time since 1983 in October 2009 and has been declared as a much worse jump than expected, since employers continue to trim jobs from payrolls.

      Precisely, the government reported that the unemployment rate spiked to 10.2 percent, up from 9.8 percent in September 2009 and this is the highest that this rate has been since April 1983. Obviously, economists were not on target this time around, as most forecasts only estimated an increase to 9.9 percent.

      There was also a net loss of 190,000 jobs in October, 2009 according to the Labor Department, which is an improvement from a revised estimate of 219,000 job losses in September, 2009. To this end, October’s jobless rate has been the 22nd straight month of job losses for the US economy. “The only good news is that the number of layoffs is dropping off, but those who are laid off still aren't finding jobs,” said David Wyss, chief economist with Standard & Poor's.

      The jump in the unemployment rate was driven up by a large drop in the number of people who describe themselves as self-employed, as well as the number of teenagers who have jobs. The unemployment rate for teenagers in the labor force soared to 27.6 percent, up 1.8 percentage points and hitting a third straight record high. Another interesting observation was that the rise in unemployment was not spread evenly across the population. For those with college degrees, the unemployment rate fell to 4.7 percent from 4.9 percent in September, 2009 while the unemployment rate for those in management, professional, and related occupations slipped to 4.7 percent from 5.2 percent.

      In comparison, the unemployment rate for production jobs, such as factory workers, jumped to 14.5 percent from 14.1 percent. Additionally, the jobless rate for workers in construction, maintenance or natural resources industries, such as mining, rose to 15.5 percent from 14.3 percent.

      “To have a real recovery you need to put people to work,” said John Harrington, who runs Harrington Investments, a socially responsible asset management firm in Napa, California. “Right now we aren't doing that.” Interestingly, the term “jobless recovery” was used mostly as a pejorative when it came into circulation in the 1990s. Nevertheless, in the wake of 2008's meltdown, it has taken on a new sense: “If you give it time, economic growth will come”. This has been the belief throughout the year of 2009.

      Again, these new unemployment numbers have been worse than economists expected, and it was not the only bad news. The average workweek remains short by historical standards, suggesting many employed people are working fewer hours than they really would prefer. It appears that people are staying unemployed longer and losing their benefits, in spite of recent government action to extend them. A short work week is not just a sign of distress for cash-strapped workers. It also suggests that it will be some time before employers start hiring again. With future uncertainty as high as it is, firms are more likely to increase the hours of underemployed workers before hiring unemployed workers.

      Another point to note is that with output falling so sharply following the oil shock and Lehman Brothers collapse of 2008, some pundits were banking on a sharp rebound. However, US historical trends show that job and wage growth have been weak for a decade. That means there has been no net private sector job growth over a nine-year span where the US population expanded by 11 percent, according to the Bureau of Labor Statistics.

      In short, the US economy appears to be still experiencing challenges within its economic recovery process. Generally, it is well understood that unemployment reacts with a time lag effect in contrast to the other economic indicators of an economy. In this instance, the lag appears to be influenced by multiple factors that normally would not have been considered in traditional economic models. Furthermore, unemployment is always one of those economic indicators which can make or break a government.

      Overall, high unemployment is not good sign for the US economy and has certainly casted doubt on that country’s economic rebounding process. Certainly, increased US unemployment will not auger well for Caribbean economies; especially those countries which depend heavily on US tourist travels.

(To view other commentaries on politics, economy and society, please visit www.dlambrose.org)

Share this story

---