Yow. The US unemployment rate may not drop below 6% until 2019
Posted by
Brian (aka trav007)
Aug 13 '09, 14:27
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By Michael S. Derby
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.
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