Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Unemployment to Remain High Through 2011 and Beyond

Economics / US Economy Nov 22, 2010 - 06:17 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDon Miller writes: Stocks are up nearly 70% from their bear market lows. Corporate profits are rising. And the economy is expanding. Yet the unemployment rate continues to hover around 10%.

Neither President Barack Obama's $787 billion stimulus program, nor the U.S. Federal Reserve's quantitative easing has generated enough good news to convince companies to hire meaningful numbers of new workers.

Of the 8.7 million people who lost their jobs during the recession, more than 7.3 million are still without work. There are still nearly five job seekers for every job opening. In fact, adding in workers who are working part time but looking for full-time work and those who have given up looking all together brings the "real" unemployment rate to a staggering 17% compared to 16.5% last year, the latest government report shows.

And even though private sector payrolls increased by 151,000 in October - bringing the number of jobs created since the economy bottomed in December 2009 to 1.1 million -the share of the population working or looking for work declined to 64.5%, its lowest level since 1984.

The percentage of consumers who expect an increase in income over the next six months has fallen to just 10%, a depth not seen since April 2009, according to the Conference Board.

All this uncertainty and fear weigh on sentiment. Surveys of consumer confidence show that job prospects and wage growth are on top of the list of concerns for Americans.

Meanwhile, the economy continues to chug along at an anemic annual growth rate of roughly 2%, barely enough to cover the number of new workers entering the job market, let alone the already idled.

Unfortunately, slow economic growth will add up to more of the same in 2011. No meaningful improvement will take place in the unemployment picture next year because the economy simply isn't strong enough to put a dent in the jobless ranks.

And even in the most optimistic scenarios, it's going to take years for a return to pre-recession levels.

Long-Term Unemployment Now the New Norm
The Great Recession has spawned some truly unique - and ugly - economic offspring. But one trend has emerged that sets it apart from most economic downturns: the swelling ranks of the long-term unemployed.

The number of people who've been collecting unemployment benefits for at least six months increased by more than 100% in 40 states over the last two years, according to an analysis of unemployment insurance data compiled by National Employment Law Project (NELP).

Overall, it's not a pretty picture...

The number of long-term unemployed (those jobless for 27 weeks and over) stood at 6.2 million in October. Those folks now account for 41.8% of the 14.8 million unemployed workers in the country.

"Long term unemployment is more than ever the norm of a layoff, and it's across the country and across the economy that this is happening," Andrew Stettner of NELP told the Huffington Post.

The reality of long-term unemployment is even worse than the numbers suggest.

"This is certainly a crisis of huge proportion and it is reflected in an extraordinary number of people unemployed for a very long time," wrote Lawrence Mishel, president of the Economic Policy Institute, in an email to the HuffPost. "It's even worse than that because we're seeing a large withdrawal from the job market and one can assume that this is among those who have been unemployed a long time -- giving up."

This trend is important because long-term unemployment feeds on itself.

There are a series of consequences that follow long-term unemployed workers far into the future. Job skills deteriorate, job networks disappear, and workers lose hope. The longer a worker is unemployed the less likely he or she is to find a new job and the more likely it is they will find only a lower-paying job.

"People lose job skills, they become unemployable," said Dean Baker, co-director of the Center for Economic and Policy Research. "It becomes a real long-term problem. People in their late 40s and 50s who end up out of work for long periods of time may drop out of the work force and never get another regular job."

There are also other - less obvious - consequences of long-term unemployment. According to recent research, job displacement can lead to significant reductions in life expectancy. Other research shows that the children of these workers earn less when they become adults and enter the labor force.

Full Job Market Recovery Years Away
The specter of long-term unemployment will sustain the unemployment rate as the skills of idled workers deteriorate and segments of the labor force are compelled to retrain or move out of the areas of the country that were propped up by the housing bubble. The likely result is that the unemployment rate will fall at only a gradual pace.

"Something similar happened in the early 1980s as the country transitioned from a focus on exports and manufacturing and embraced the technology revolution," Anthony Mirhaydari wrote in a column for MSN Money.

The unemployment rate climbed from a low of 3.4% in 1969 to a high of 10.8% in 1982. It took an additional 18 years before unemployment moved back under 4%.

To determine how long the recovery will take this time, the Brookings Institution recently examined the "job gap," or the number of months it would take to get back to pre-recession employment levels while absorbing the 125,000 people who enter the labor force each month.

The results show that even under the most optimistic scenarios, it will take years to eliminate the job gap.

If the economy adds about 208,000 jobs per month, the average monthly rate for the best year of job creation in the 2000s, it will take 142 months, or about 12 years to close the job gap.

At a more optimistic rate of 321,000 jobs per month, the average monthly rate for the best year of the 1990s, the economy will reach pre-recession employment levels in 60 months, or about 5 years.

Here's the takeaway: Based on the history, pre-recession unemployment rates won't be seen again until at least 2016, and in all probability much later, as idled workers find it harder and harder to land jobs.

Will Congress Extend Unemployment Insurance Again?
For workers experiencing long spells of unemployment, unemployment insurance is one tool to help ease the pain until the economy recovers.

Congress acted to extend unemployment benefits back in 2008 with the Emergency Unemployment Compensation Program (EUC) just after the recession began and has extended it four times.

The U.S. Department of Labor recently published the findings of a multi-year study that showed the EUC has played an important part in stabilizing the economy during the recession. In fact, the study claims that economic activity increased by two dollars for every dollar spent on benefits.

The study also showed that, at the height of the recession, the EUC averted 1.8 million job losses, kept the unemployment rate approximately 1.2 percentage points lower and boosted GDP $315 billion higher from the start of the recession through the second quarter of 2010.

But unless the lame duck Congress moves to extend them once again, the current round of EUC legislation is scheduled to begin phasing out at the end of November. If no extension is approved, two million workers, or about one-third of the long-term unemployed, will lose their benefits in December (just in time for the holidays!), according to NELP.

"The current expiration date will cause a cascade of unemployed workers to fall off the unemployment rolls, prematurely cutting benefits for some and making any form of an extension completely unavailable for others," NELP noted in a recent report.

Some Jobs May Never Come Back
To be clear: not all the news on the job front is bad.

The Conference Board last week reported its index of U.S. leading indicators rose for a fourth consecutive month, manufacturing surged in the Philadelphia area, indicating the economy is picking up steam.

Temp-hiring companies such as Manpower Inc. (NYSE: MAN) and Robert Half International Inc. (NYSE: RHI) are seeing a big increase in demand as businesses need to ramp up production but are leery of adding new employees.

Even initial jobless claims fell earlier this month.

"The soft patch is behind us," Jonathan Basile, an economist at Credit Suisse (NYSE ADR: CS) in New York told Bloomberg News. "We have a little more momentum. Employers are getting a bit more optimistic about the outlook and don't need to cut costs like before."

But we are experiencing an unusual recovery on many fronts - including a historic rise in the long-term unemployed.

And the simple truth is that some jobs that have been lost may never come back.

The housing market bubble has burst and we simply don't need all the construction workers, real-estate agents and mortgage brokers anymore. And we don't know where new jobs will come from.

The evidence suggests that trade and transportation will be important areas in the years to come as America pushes its exports. Job categories related to mining, metals, plastics and rubber products have seen healthy increases over the past few months, according to Labor Department statistics. Education and health services have also seen gains, as has clean energy.

Investors can ride along with the iShares Dow Jones Transportation Average Exchange Traded Fund (ETF) (NYSE: IYT), or long time Money Map Press favorite Newmont Mining Corp. (NYSE: NEM). Freeport McMoRan Copper & Gold Inc. (NYSE: FCX), focus of a recent Money Morning "Buy Sell or Hold" column also could benefit. And in the clean energy sector Suncor Energy Inc. (NYSE: SU) might deserve a look.

But all of these should be viewed from a long-term perspective, just as most of those caught up in the unemployment morass face a long-term return to normalcy.

Source :

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in