Unemployment in developed countries may be worse than expected
The hope that unemployment in the largest nations will peak at 8 percent or even 9 percent appears to be going away. That means that even the currently planned stimulus packages in places like the U.S., E.U., and U.K. may not be enough to keep the economy out of a recession that could go into 2010 or even beyond.
According toReuters, "The global economic crisis will hit jobs hard, with unemployment set to reach double digits in many developing and advanced countries, the Organization for Economic Cooperation and Development (OECD) said. "The domino effect from jobless rates at that level will be significant. Import and export levels will falter even further than estimated. Real estate values in developed countries will fall as people lose jobs. Consumer spending will slide at a greater rate than it did in 2008.
But the greatest threat of high and prolonged unemployment is that national deficits, especially in the U.S., will be larger than previously estimated. The American government may be forced to extend unemployment benefits and add to the stimulus package in an attempt to create additional jobs. People out of work will not be paying taxes, so receipts to the IRS will almost certainly be lower that the Administration's budget forecast.
Put another way, if the OECD is right, the economy is about to get much worse very quickly.
Douglas A. McIntyre is an editor at 24/7 Wall St.