Is High Unemployment The “New Normal?”
The economy is getting better, the stock market is moving higher, and consumer confidence is growing, but the national unemployment rate is stuck above 8 percent, and the jobless rate in Jersey remains at 9 percent. So what’s going on here?
Rutgers economist James Hughes says despite the improvement we’re seeing “we are down almost 5 million jobs from where we were before the recession began – so that means we need 2 and a half years, growing at 2 million jobs per year, which would take us somewhere certainly into 2014 – however the labor force keeps growing – at about 1-point-2 million persons per year – so we have to find jobs for them also.”
He says the bottom line is “given the crater we’re climbing out of – we’re looking at perhaps 2018 or so before we get back to pre-recession levels of unemployment…and that assumes we can maintain a very strong job growth rate, which may be difficult because historically economic expansions last about 60 months …so on average we only have two years left before another recession hits – so that would push the recovery even further into the future.”
Hughes points out the Great Recession had several effects – one is simply a huge loss in jobs – but also it accompanied a structural change in the economy – where many jobs are not going to come back- those jobs have disappeared and we have an unemployed labor force who may not have the skills to participate in the new jobs – so one of the problems facing the economy today is that skill mis-match between those who want work, and the requirements of the jobs that are essentially out there.
He says “we have a new ‘normal’ in the American economy today, whereby we’re going to have much higher levels of unemployment – our employment to population ratio has declined – we are in the midst of a structural adjustment…this has been the deepest recession since the great depression – we slipped into a very deep crater – we’ve climbed our way partially out of it – we may have recovered only 45 percent of the jobs that were lost during the great recession – but we still have a huge job deficit to make up.”