A 10.2-per-cent U.S. jobless rate sounds terrible. The reality may be even bleaker.
The real jobless rate, which officially hit a 26-year high last month, is nearly double that if discouraged and underemployed workers are counted, a level that will hamper any recovery, former U.S. labour secretary Robert Reich said yesterday.
He pegs the unofficial rate at about 20 per cent, and believes that joblessness is likely to persist throughout next year. That is why Mr. Reich, who has served in three U.S. administrations and is now a professor at University of California, Berkeley, and economic adviser to President Barack Obama, isn't counting on any "great and vigorous" recovery for the world's largest economy.
"Technically, we are probably already in a recovery in the United States ... but tell that to most citizens of the United States, and they will laugh at you," he said at a Toronto forum on global cities.
The problem with such high unemployment and underemployment isn't just economic hardship for those individuals, he added. It's one of demand: Consumers drive 70 per cent of the U.S. economy and dwindling earnings combined with huge debt loads mean "many people are not likely to go to the malls for many years."
The official unemployment rate doesn't include several parts of the labour force: discouraged people who have given up looking for work; part-time workers who would rather be full-time; and those whose full-time jobs have been cut to part-time. Nor does it factor in people who have found a new job at a much lower salary than their old one.
When those people are included, the real picture may be even worse than the Labour Department's "under-employment" rate of 17.5 per cent - or more than one in six workers.
Mr. Reich sees the jobless rate staying high because, as demand grows, companies will first increase their employees' hours before they hire new people. There's plenty of scope to do that: The official work week in the U.S. has sunk to a record low of 33 hours.
He believes the official jobless rate will remain above 10 per cent throughout next year before easing in 2011. At least seven million jobs have been lost through this downturn, and he doesn't expect the economy to replace them for at least three or four years.
Federal Reserve officials echoed those concerns yesterday. In the first public comments since last Friday's labour report, regional Fed banks in San Francisco and Atlanta said joblessness will remain high for several years amid tepid hiring.
"With such a slow rebound, unemployment could well stay high for several years to come," said Janet Yellen, president of the Federal Reserve Bank of San Francisco. "In other words, our recovery is likely to feel like something well short of good times."
Mr. Reich wasn't all doom and gloom, urging businesses to keep investing in training, research and staff development to better compete in a global economy. Companies shouldn't ignore opportunities, including the chance to innovate, he said.