Forecasts for unemployment start to surge
A year ago, most economists were projecting fairly mild unemployment for the U.S. this year. Most were forecasting a range of 7 to 8 percent. In February, the figure has already gone beyond that.
Now that it is clear that the recession will last for the year, forecasters are upping their jobless rate estimates -- by a lot. The new "stress-testing" program for banks assumes a worst case for unemployment at 10 percent. The closely followed economist Nouriel Roubini says the figure could go above that.Add to the gloom a respected survey of other economists. According to Bloomberg, "The U.S. jobless rate will reach 9.4 percent this year and remain elevated through at least 2011, threatening the nation's longer-term growth potential, a monthly Bloomberg News survey indicated." Looking at the estimate, the temptation would be to focus on the absolute peak number for unemployment. That would be a mistake.
What the Bloomberg survey shows is that unemployment is not going to spike up and then come down quickly. It will be a boat anchor tied to the economy for several years, making a full economic recovery almost impossible. And that is what most analysts will be watching. Not the high point of joblessness, but how fast the economy can add jobs as things begin to get better.
Douglas A. McIntyre is an editor at 24/7 Wall St.