U.S. job growth not even able to keep up with population growth

To the editor,

After nearly two years the U.S. economy is still unable to create jobs at a pace equal to population growth. In Novemer the unemployment rate stood at 9.8-percent, well above the 5-percent average in the decade before the financial crisis. Many Americans have given up looking for employment and are no longer counted in the unemployment numbers. Long-term unemployment is a concern. Almost one-half of the officially unemployed have already been out of work for at least six months. The decline of the construction and manufacturing sectors has created a pool of workers with unneeded skills. This occurred while problems in the housing market have led to a reduction in labor mobility. Many people cannot sell their homes and move to areas with better employment prospects. These factors have raised the structural unemployment rate by around 1.5-percentage points.

Prospects for a rapid improvement in the employment situation are not encouraging. The economy needs to create around 150,000 jobs a month just to keep up with growth in the working-age population. It almost reached this target in October, but employment fell in each of the previous four months. Federal and state governments are trying to get their finances under control. At least they are expressing concerns about such things. Governmental actions taken to reduce spending will cause a decrease in governmental employment. This will mean it will be solely down to the private sector to create jobs. That said, companies will remain reluctant to rebuild their payrolls rapidly. The result will be that the unemployment rate will remain roughly where it is or rise 2011. Persistently high unemployment weighs heavily on growth. 70-percent of spending generates from private consumption. 2011 does not appear to be the big bull run recovery we have see in the past.

Real estate problems will weigh on household finances, limit labour mobility and they will also continue to hurt the banking sector. Not only are one-quarter of houses now worth less than the mortgages that were used to buy them but the persistently high unemployment rate has also undermined the ability of many home owners to service their debt. Government programs that have been put in place to help restructure mortgages often provide a respite but not a full resolution. This means that there is still a large amount of housing likely to come into foreclosure, and many homes already held by banks as a result of foreclosures have not yet moved onto the market. The likelihood of foreclosures exerting further downward pressure on the assets quality of US banks will contribute to their reluctance to lend more aggressively.

Just my honest opinion

Marc Abear

Meredith