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Job seekers wait in line to speak with job recruiters at a job fair for businesses in the medical field in New York.Spencer Platt

When U.S. Federal Reserve chairman Ben Bernanke held court during his historic first press conference last week, he mentioned inflation, which is half of the central bank's twin mandate, more than 80 times.

The other half of the mandate - employment - rated only 16 references. That's partly because of the questions that were posed and partly because the central bank simply doesn't have the weapons to tackle stubbornly high unemployment.

It also underscores the remarkable lack of enthusiasm in U.S. policy circles for attacking the most serious fallout from the housing and credit collapse and subsequent severe recession. Even as millions of Americans run out of extended jobless benefits, politicians at every level are turning their attention to belt-tightening and the Federal Reserve is again preoccupied with the risks of inflation.



The latest U.S. employment numbers due on Friday are expected to show slightly lower job creation in April and a jobless rate holding steady at 8.8 per cent. That's an improvement over unemployment rates closer to 10 per cent late last year, but well above the Fed's own target of about 5.5 per cent, something even the central bank doesn't expect to see for at least another five years.

The Fed and most analysts predict these numbers will improve gradually over the next several years, in step with a continuing slow economic recovery. They are counting heavily on rising profits in the private sector translating into increased capital spending and job growth.

But that is simply an illusion, some prominent economists insist.

"This goes down really as the mother of all jobless recoveries," said David Rosenberg, chief economist and strategist with Gluskin Sheff + Associates. "Especially when we're still digging out of a hole. Barely a fifth of [U.S.] employment losses have been recouped. That's a rarity for the second year of a recovery cycle. It's never happened before."

One huge obstacle to a quicker pace of U.S. job growth is the enormous cutbacks by debt-strapped state and local governments, whose share of total spending is 40 per cent larger than that of the private sector.

"I don't think there's a full appreciation that, outside of consumer spending, this is the largest contributor to GDP in the United States," Mr. Rosenberg said in an interview. "You're seeing incredible cuts that are going to continue, and not just at the local level."

Even as local and state cuts level off, expected federal cutbacks stemming from budgetary tightening and an end to fiscal stimulus will almost certainly mean further job losses in the second half of the year.

Another impediment to a job recovery stems from the destruction in the U.S. housing market. Millions of Americans are stuck with negative equity in their homes, which means they can't simply pick up and move elsewhere for employment without writing a big cheque to their lenders, Mr. Rosenberg noted.

So there goes some of the vaunted labour mobility that helped spark relatively quick U.S. job recoveries after previous recessions.

"Long-term unemployment, once rare in this country, has become all too normal," economist Paul Krugman said in his latest New York Times column. "More than four million Americans have been out of work for a year or more."

And a growing number of that army of unemployed are running out of even emergency aid.

As of end of March, 3.55 million Americans were receiving emergency unemployment compensation - ranging from the normal 26 weeks to extended federal emergency payments running 99 weeks.

Simple calculations show that Americans who began receiving the extended aid in the summer of 2009, when the jobless rolls swelled by almost 800,000 a month at the height of the crisis, are coming to the end of the public assistance. While receiving the extended help, they had to show they were still looking for work. Soon, it won't matter.

 "There is lots of debate on the '99-weekers,' once they're cut off from federal benefits," said Sophia Koropeckyj, a managing director with Moody's Analytics in Westchester, Pa. When their benefits disappear, "people could redouble their job search, or they could drop out of the labour market altogether and not be counted."

No one yet knows if these unfortunates will indeed give up, thereby improving the jobless rate while increasing the welfare rolls.

More than five million Americans are already unemployed without any benefits, 1.4 million more than a year ago.

For a truer snapshot of the U.S. labour market, Mr. Rosenberg turns his focus to the ratio of employment to population, which has fallen to 58.5, its lowest level in 28 years. Before the Great Recession put the labour market in a choke hold, the ratio was 63 per cent. To get back to the level that prevailed before the collapse and taking into account population growth, the U.S. would have to generate well over 10 million new jobs.

That means at least another three to four years before the labour market functions normally again. And that would be under ideal conditions.

Well before that, unemployment seems certain to emerge as a major political issue south of the border.

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