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document.write(''); document.write(''); United States function toggle(embed){ if(document.getElementById(embed).style.display == 'none'){ document.getElementById(embed).style.display = 'block'; }else{ document.getElementById(embed).style.display = 'none'; } }Unemployment in America
Jobs gloom, with glimmersNov 6th 2009 | WASHINGTON, DCFrom Economist.com
America's jobless rate passes 10% but the job market should start to improve soon APIT WAS widely expected to happen at some point, but not yet. The unemployment rate in America jumped to 10.2% in October, up from 9.8% the month before, an increase that was far more dramatic than most economists had projected.
The grim milestone demonstrates that, even though the recession is apparently over, for the average worker it remains in force. The misery is actually greater than the headline number suggests: an alternative unemployment rate that includes those who would like to work but are not looking for a job, and those who are employed part-time but would rather work full-time, rose by half a percentage point to 17.5%. This rate has jumped almost nine percentage points since the recession began in December 2007, almost double the increase of the regular unemployment rate. The median spell of unemployment now stands at a record 18.7 weeks.
document.write('');Yet there are other signs that the problems may eventually ease, and indeed the jobs report itself, released on Friday November 6th, contains puzzling contradictions. The total number of non-farm payroll jobs fell by 190,000, or by 0.15%, led by construction, manufacturing and retailers. That was a bit more than expected, but consistent with a generally moderating pace of job losses. Payroll declines in the previous two months were revised down by a total of 90,000. A shift from downwards to upwards revisions often accompanies a bottom in jobs growth. The number of people who were employed by temporary agencies rose by 33,700, or 2%, the third monthly gain. This is usually considered a precursor to more permanent recruitment, although Capital Economics notes this gave a false signal in 2002. The number of new claims for unemployment insurance has also declined steadily in recent weeks. Employment in economies highly geared to the American market, such as those of Canada, Japan and So
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Unemployment in America
Nov 6th 2009 | WASHINGTON, DCFrom Economist.com
IT WAS widely expected to happen at some point, but not yet. The unemployment rate in America jumped to 10.2% in October, up from 9.8% the month before, an increase that was far more dramatic than most economists had projected.
The grim milestone demonstrates that, even though the recession is apparently over, for the average worker it remains in force. The misery is actually greater than the headline number suggests: an alternative unemployment rate that includes those who would like to work but are not looking for a job, and those who are employed part-time but would rather work full-time, rose by half a percentage point to 17.5%. This rate has jumped almost nine percentage points since the recession began in December 2007, almost double the increase of the regular unemployment rate. The median spell of unemployment now stands at a record 18.7 weeks.
Yet there are other signs that the problems may eventually ease, and indeed the jobs report itself, released on Friday November 6th, contains puzzling contradictions. The total number of non-farm payroll jobs fell by 190,000, or by 0.15%, led by construction, manufacturing and retailers. That was a bit more than expected, but consistent with a generally moderating pace of job losses. Payroll declines in the previous two months were revised down by a total of 90,000. A shift from downwards to upwards revisions often accompanies a bottom in jobs growth. The number of people who were employed by temporary agencies rose by 33,700, or 2%, the third monthly gain. This is usually considered a precursor to more permanent recruitment, although Capital Economics notes this gave a false signal in 2002. The number of new claims for unemployment insurance has also declined steadily in recent weeks. Employment in economies highly geared to the American market, such as those of Canada, Japan and South Korea, has already turned up.
The increase in GDP has not translated into jobs yet because of firms’ strong tendency to work each employee harder early in a recovery before hiring more of them. The Labour Department reported that productivity soared by 9.5% at an annualised rate in the third quarter, a rate surpassed only once since 1983 (in 2003). China can sustain such rates of productivity growth; America cannot. Assuming that sales keep edging higher, companies will soon have to boost hours, employment, or both.
If the underlying trends are constructive, why is unemployment still rising fast? In part, it is a statistical mystery. The payroll data are based on a survey of establishments covering roughly a third of the workforce which is continually revised until almost all establishments have been counted. The household survey is based on a much smaller sample of 60,000 households which is volatile and never revised. It showed a gigantic, 589,000 drop in the number of people working in October, triple the tally of the payroll report. Once the two surveys’ differing definitions of a job are reconciled, the household survey shows 914,000 more lost jobs in the past 12 months than the payroll survey. Perhaps a third of the discrepancy will disappear with forthcoming revisions to the payroll data; the remainder is a mystery.
Politicians will focus on how to respond to voters’ demands for action. On Friday Barack Obama was expected to sign into law a hotchpotch of stealth stimulus measures. They include some badly designed but popular measures such as letting money-losing companies claim tax refunds against profits earned up to five years earlier and an extension to the tax credit for buying a home. A third measure, extending unemployment benefits for some who have lost their jobs, will alleviate hardship and boost demand but will probably raise, not lower, the unemployment rate. Richer benefits encourage workers to look for a job rather than quit the search, and to turn down unsatisfactory job offers.
Mr Obama is reportedly interested in a tax credit to encourage employers to hire new workers, although a similar measure in the 1970s had at best a marginal benefit according to Gary Burtless, a scholar at the Brookings Institution. To make a real dent in unemployment would require a lot more money. Mr Obama and his Democratic allies in Congress are reluctant to spend more because worries about the deficit were probably one reason why voters rejected Democratic candidates to be governors in Virginia and New Jersey this week. Peter Orszag, his budget director, acknowledged this week that the deficits he now projects are “well above the fiscally sustainable” level and the administration is “considering a number of proposals” to bring them down. Although painful, patience is the better choice for policymakers. Employment ought to recover eventually.
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