Disgruntled American workers have yet another reason for pessimism: At the current rate of job creation, the U.S. unemployment rate will not fall back to “normal” levels – below 6% – until 2023.
Through most of this year the U.S. economy has managed to create about 119,000 jobs per month, but that’s barely enough to keep pace with population growth. Only job creation levels of well over 120,000 jobs per month will drive down the 9.1% unemployment rate.
For example, to get the unemployment rate below 6% by the end of 2014, job creation would need to be about 244,000 per month – more than double current levels.
“The sluggish recovery in employment is continuing, with private payroll growth still not even fast enough to keep unemployment from rising further in the medium-term, never mind bringing it down,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, told AFP.
That’s grim news for millions of Americans.
Although a revived U.S. economy would go a long way to beefing up job growth levels, few see an imminent turnaround, including the typically optimistic chairman of the U.S. Federal Reserve, Ben Bernanke.
On Wednesday Bernanke revised the Fed’s projections for the unemployment rate upwards, with estimates for 2012 now up from 8% to 8.6% and estimates for late 2014 at between 6.8% and 7.7%.
“Evidently … the drags on the recovery were stronger than we thought,” Bernanke said at a news conference.
Of course, Bernanke himself is partly responsible for the poor rate of job creation, according to Money Morning Global Investing Strategist Martin Hutchinson.
“It’s Bernanke’s fault,” Hutchinson said. “The very low interest rates are causing companies to substitute capital for labour. You can see the effect in today’s very good third-quarter productivity number — employers are using less labour per unit of output and more capital, which they can get cheaply. The effect is that job creation is very slow. That’s the very opposite of 1983 when interest rates were very high and job creation averaged about 400,000 a month.”
The high unemployment rate has become a major problem for U.S. President Barack Obama, whose attempts to address the issue have had little impact.
Hutchinson said there isn’t much that the president or Congress can do to create jobs, although that cutting federal spending would help “because it would free bank funds for lending to small business.”
It’s the Fed that could have the greatest impact.
“Interest rates are easier to change and more critical,” Hutchinson said. “The way we get back to rapid job creation is by raising interest rates to above inflation, let’s say 5%. There would be some initial turmoil, but within a year job creation rates would soar.”
Of course, it’s extremely unlikely that the Fed chairman will opt to raise interest rates anytime soon. In August Bernanke promised to keep rates at their current low levels of 0% to 0.25% “at least through mid-2013.”
The Federal Open Market Committee (FOMC), which sets Fed policy, decided on no new action at its meeting this week, while Bernanke blamed Congress for its inaction on job creation.
“We are trying to do our best to support economic growth and job creation,” Bernanke said. “It would be helpful if we could get assistance from some other parts of the government to work with us to help create more jobs.”
With the Fed making the problem worse, and Congress and President Obama unable to make a significant difference, job creation will continue to tread water – terrible news for American workers that have become increasingly dissatisfied.
Americans have grown increasingly unhappy about many aspects of their jobs, but with job creation low and unemployment high, many are reluctant to leave their current job because of the scarcity of opportunity.
A Gallup Inc. poll taken in August showed that U.S. workers are more dissatisfied with their jobs now than they were in 2008. Nearly one-third, 30%, were unhappy with their salaries as well as their health insurance benefits. More than a quarter, 26%, were dissatisfied with their chances for promotion.
A more recent Gallup poll taken just last month indicated 71% of American workers are “not engaged” or “actively disengaged” from their jobs.
Still, few employees want to chance giving up what they have, no matter how much they dislike it.
An employee’s willingness to quit “is probably the best single indicator of how confident workers are,” Lawrence Katz, a Harvard University labour economics professor, told Bloomberg News.
As long as job creation in the United States remains anemic – which thanks to government policies now looks like the better part of the next decade – unemployment will continue to plague the American worker.
“Employers are not going to step up hiring unless demand picks up. But consumers are not going to spend more until employment strengthens,” Kathy Bostjancic, director of macroeconomic analysis for The Conference Board, told CNBC. She added that no help is on the way from monetary or fiscal policy, at the federal, state, or local level. “This all adds up to a labour market that will continue to struggle to deliver even modest gains this autumn or winter.”