Business Times - 06 Oct 2009
US jobs data show situation could worsen
Unemployment at its highest in 26 years means confidence could take a hit
By LEON HADAR
THE report coming out of Copenhagen about US President Barack Obama's high-profile failure to win the Olympics games for Chicago made for a less than auspicious backdrop for the other depressing news last week.
The latest jobs report that was issued by the US Labour Department on Friday seemed to be worse than the economists had predicted. The consensus among economists had been that the American economy would lose 190,000 jobs in September. Instead 260,000 were lost, with the unemployment rate rising to 9.8 per cent, the highest it's been in 26 years or - to make it sound even worst - in a quarter century.
If the decision by the International Olympic Committee (IOC) to reject Chicago's bid to host the 2016 Olympic Games came as blow to the perceived international star power of President Obama who together with First Lady Michelle Obama, flew to Copenhagen to lobby the IOC in favour of their home town, the new unemployment number raised some doubts about the ability of President Obama to deliver a speedy economic recovery any time soon.
And, it could even get worse before it gets better. If it gets better, that is.
While some statistics suggest that the American economy is out of the recession and is starting to grow again, there are very few signs that this upturn has been creating new jobs.
In fact, the expectation is that many of jobs that were lost in the manufacturing sector, including in the auto industry, have been lost for good. At the same time, while 'old' jobs are dying, the hopes for new job opportunities for young people entering the work force have yet to be fulfilled.
According to most forecasts, many of these new jobs would have to be created in the education and health sectors and the emerging green industry. But the problem is that the growth in these industries would probably depend on more public investment, and that in turn, would require more government spending on the federal and state levels.
And there is certainly very little enthusiasm in Congress today for new government-financed economic stimulus programmes.
The discouraging conditions of the American job market were highlighted by Keith Hall, a Labour Department commissioner, during a Congressional testimony in Washington.
'A total of 15.1 million persons were unemployed in September, twice the number at the start of the recession,' Mr Hall said. 'The number of long-term unemployed rose to 5.4 million in September; this group has grown more than fourfold since the start of the recession.'
Hence, the combination of very weak private-sector job creation and a reluctance in Washington to increase government spending, make it likely that the American economy could be stuck around or even above the 10 percent unemployment rate, that is, a long-term double-digit unemployment rate.
Adding to the gloom in Washington is the recognition that if one adds to the unemployment figures the rate of under-employment - Americans who are working part-time work or have given up looking altogether - the real unemployment rate is probably close to 17 per cent and perhaps even much higher is some states.
Returning to Washington from his trip to Copenhagen, President Obama rushed to the White House where during a brief press conference he tried to spin the new job numbers by accentuating the positive - the American economy is recovering, and by speaking about the historical relationship between economic growth and jobs growth - one lags behind the other.
The jobs report was a 'sobering reminder that progress comes in fits and starts and that we're going to need to grind out this recovery step by step', Mr Obama said, adding that employment was often 'the last thing to come back after a recession'.
But for most Americans it's the unemployment numbers and not the slight growth in the GDP that provide a sense of what is happening in the 'real economy'. And, indeed, reports about drop in consumer confidence suggest that American consumers remain insecure about their economic conditions and are, therefore, not doing a lot of spending.
Mr Obama also spoke about the need to restructure the American economy in the 21st century in a way that will provide Americans with more opportunity for education and skills and allow them to compete for the jobs of the future.
But the fact that at a time of rapid technological changes worldwide, so many Americans are now being left behind in the job market and have no opportunities to go through the required re-training in their respective fields would probably make it even more difficult for them to find the kind of new high-value-added, high-skilled services sector jobs that were supposed to serve as the main engine of American economic growth in the coming years.
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