It appears more and more economists are beginning to think so.
By Howard Gold
NEW YORK (MarketWatch) — Slowly, over the last year, it’s begun to dawn on us: The economic recovery isn’t really making a dent in unemployment.
The public knew this much earlier than economists or pundits did, and as for politicians — don’t ask!
Survey after survey showed Americans didn’t believe the economy was recovering. And people who commented on MarketWatch articles have been downright hostile to any notion that either the markets or the economy were getting better.
But economists need hard data before changing their minds. And over the past few months, more and more of them have concluded that indeed the depth of this particular recession and its roots in the financial crisis have combined with structural changes in the economy to push the so-called “natural” unemployment rate in the U.S. permanently higher.
Read Howard Gold’s analysis “White-Collar Recession, Blue-Collar Depression” on MoneyShow.com.
If they’re right, it would be bad news for millions of Americans whose prospects are bleak enough already. It also would make the U.S. economy more like the Europe we’ve routinely derided — without the social safety net European countries typically provide.
I hope I’m wrong and the fabled American ingenuity in which I strongly believe — and whose most shining star, the great Steve Jobs, died last week — kicks in with new fervor.
But it looks increasingly like that will not be a panacea this time around, either.
Listen to Charles Plosser, president of the Federal Reserve Bank of Philadelphia, in a speech a couple of weeks ago.
“These numbers are troubling, especially when more than 40% of the unemployed, or some six million people, have been out of work for 27 weeks or longer,” he said.
“Millions of unemployed workers may take longer to find jobs because their skills have depreciated or they may need to seek employment in other sectors. These structural issues will take time to resolve. Jobs and workers will need to be reallocated across the economy, which is a long and slow process.”
A structural change
Did you catch the word structural? It was no accident. Here’s Atlanta Fed president Dennis Lockhart in a speech two days earlier.
“To me, it is not clear to what degree structural factors are impeding the filling of job vacancies,” he said.
“And… it is not clear to what extent the long-term unemployed are becoming a class of permanently unemployed, creating a problem resembling the so-called structural unemployment of some European countries.”
Again, notice the use of the word structural — twice. And note how Lockhart speculated about a “class of permanently unemployed” which he compared with “some European countries.”
When top officials start speaking like this within days of each other, something’s up.
You will find the rest of the article at this link.
Mr. Gold goes on to correctly identify the horrible housing market as being one of the impediments to economic recovery. I have long felt that real estate, both commercial and residential, have always been one of the main underpinnings of our economy, as you could always count on prices to at least remain steady, if not actually go up – regardless of the economic conditions.
We do not have that anymore, and as someone who spent over twenty-five years in a related industry, I do not see it coming back anytime in the near future, as I believe we are looking at at least a decade for this to flesh itself out – perhaps even longer.
Gold also mentions that companies are sitting on piles of cash but are not hiring. I wish he had expanded on this a bit, as I think one of the main reasons is that employers are uncertain about, and not a little scared of, massive government regulations that are beginning to come on-line, both the ones that are known as well as what may be coming down the road but are yet unknown.
One thing is certain – as long as the current administration remains in power, there is not going to be any economic recovery to speak of, and it is beginning to look to me like another major downturn is just around the corner.
Better hang on tight, because I think we are in for a long, hard ride.