New forecasts: better US economy, fewer jobs
If this is what recovery is going to look like, it's not going to set anyone's pulses racing.
Sometime this quarter, perhaps this month, the American economy is expected to hit bottom and begin to rebound. But the number of jobs will fall. And fall. And fall.
It's not unusual that an economy improves before the job market does. What's different is that the lag may be unusually long this time, threatening incumbents (from the White House on down) with deafening cries of "jobless recovery."
The problem was illustrated in a pair of government reports issued Thursday. The Commerce Department said that the economy shrank at an annual rate of 1 percent last quarter. That bodes well for the economy because analysts had expected the estimate of gross domestic product would be revised downward to about 1.5 percent.
At the same time, the Labor Department reported that 570,000 Americans signed up for first-time unemployment benefits last week. On the face of it, that counts as good news. The figure was 10,000 below the number of people who had signed up the week before. The closely watched four-week average – which smooths out the weekly ups and downs – also fell a little.
But what these labor figures really mean is that the US unemployment situation is getting worse a little more slowly than it was during the throes of the crisis five months ago. If 650,000 Americans a week hadn't signed up for unemployment benefits in March, 550,000 would rightly be regarded as a disaster.
Thursday's report suggests that unemployment will continue to climb for some time – maybe to 10 percent by November or December.
The two reports point to the apparent disconnect now taking place in many economists' projections. Even as they revise upward their estimates of future economic growth, they're revising downward their assumptions for job growth.
Two weeks ago, for example, a survey by the Federal Reserve Bank of Philadelphia found that economists on average had raised their forecast for third-quarter growth from an annual rate of 0.4 percent to 2.4 percent. (For economists, that represents a stunning surge of enthusiasm.)
At the same time, they lowered their projections for job growth. They forecast that unemployment would average a consensus 9.2 percent this year (up from their previous 9.1 percent) and rise to 9.6 percent next year. The forecasters also raised their projections for unemployment through 2012 (8 percent, up from 7.7 percent previously).
If they're right, then this bout of unemployment could be as chronic and long-lasting as the one that occurred during the back-to-back recessions of the early 1980s.
And for many Americans, the watchword of this slow-motion recovery won't be "Fasten your seat belt." It'll be: "Yoke up to the ox cart."
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