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Economists: US Unemployment Likely to Rise

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The US unemployment rate has hit its highest point in a quarter century, and economists still expect the numbers to climb even higher.

The Labor Department announced on Friday that unemployment had soared from 8.9 percent in April to 9.4 percent in May -- the highest number since July 1983.

That puts total job losses at 6 million since the start of the recession in December 2007, the department said.

Bill Beach, director of the Center for Data Analysis at the Heritage Foundation, a Washington D.C.-based think tank, said the figures are likely to rise even if the economy recovers soon from this worst economic downturn in decades.

That is because recessions follow a typical pattern, he said.

"Unemployment usually continues to rise for around six months after the economy has recovered," he said, explaining that companies are hesitant to hire new workers until they are convinced the economy has bounced back.

"They know business is picking up but they are going to continue to work (their employees) to the bone until they are sure the recession is over," he noted.

"I would expect the unemployment rate to rise into the middle of 2010," Beach said.

As for the length of the recession, economists differ.

"I fully expect the recession to be over in the next several months," Beach said.

Barry Bosworth, former presidential advisor and senior fellow at the Brookings Institution, another Washington D.C. think tank, however, said the downturn is still getting worse and that there are still no signs of a turnaround. As there is no increase in production, there will be no growth in employment, he said.

Meanwhile, many have pegged their hopes on the stimulus package, anticipating the funds to inject the economy with a shot of adrenaline and spur rapid job creation.

While U.S. President Barack Obama recently expressed optimism that the economy will eventually turn a corner, his administration is under pressure to show the impact of the stimulus bill.

Critics have questioned the package's effectiveness, which the administration said would generate more than 3 million jobs. Other opponents disagreed with the stimulus entirely, arguing that a generous tax cut would be the fastest way to jump start the economy by spurring an increase in consumer spending.

From the start of the downturn, the Obama administration said unemployment would continue to rise for a while after the spending package, which would stave off disaster before the economy picked up again.

The administration claimed the stimulus created 150,000 jobs during its first 100 days and that it will add 600,000 more jobs during the next 100 days.

"We've laid a good foundation in the first 100 days of the Recovery Act and in the next 100 we plan to build on that foundation and accelerate our efforts so we can accomplish even more," said Vice President Joe Biden. "We're going to get more dollars out the door, more shovels into the ground and more money into the pockets of workers and families who need it most."

That money, however, is slow to make it out of government coffers.

Obama recently made a statement telling government departments to hurry the release of stimulus moneys into projects that will rejuvenate the economy, with the goal of adding those 600,000 jobs by the end of summer.

But for the funds' various recipients, finding places to spend a sudden overflow of cash requires much planning, which could slow delivery, Beach said.

Indeed, only 6 percent of the funds has been disbursed.

Beach also noted that 1983 was the last time such a hefty stimulus package was implemented, and by 1987 the funds still had not been completely released.

"We are seeing the same pattern again," he said. "That's the way bureaucracies work. They just don't move very fast."

Bosworth said spending is ramping up a little more and that it will peak later this year.

The tax cut, however -- a minor portion of the package -- has been in effect for two months, although it is too small to make a significant difference, he added.

As for what kind of jobs the stimulus funds will generate, economists also differ.

Beach said most will be temporary -- filling pot holes, repairing infrastructure and the like -- and are unlikely to revive the economy in the long term.

Ben Carliner, director of research at the Economic Strategy Institute, another Washington D.C. think tank, however, said that such jobs cause a ripple effect through the economy. Repairing a train station requires not only construction workers but also engineers, materials and planners -- a host of white and blue collar jobs.

Going forward, Obama's "green new deal" -- a plan for renewable energy projects -- is expected to create many high paying research and development positions, he said.

Obama recently reassured Americans that the country would make it through these tough economic times.

"We're still in the middle of a very deep recession," he said. "It's going to take a considerable amount of time for us to pull out."

Still, he said the administration is working hard to bring relief. "We've done more than ever, faster than ever, more responsibly than ever, to get the gears of the economy moving again."

Beach said that if there is one silver lining in this recession, it is that it could spur a rash of entrepreneurialism.

When people are laid off, many opt to start their own businesses. While many new ventures fail, some become successful and grow, creating more jobs.

Recessions are also a good time for entrepreneurs to secure a labor force, as the pool of unemployed people is large and many will jump at a job opportunity, he said.

(Xinhua News Agency June 13, 2009)

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