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 labor. You can see the effect in today’s very good third-quarter productivity number — employers are using less labor 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.