US Employment Outlook Poor, Little Improvement Likely
Most analysts see the unemployment rate steady at 8.2%, while a few see an increase. The wild card is the number of adults actually working or seeking jobs -- the measure of the labor force used to calculate the unemployment rate.
Adding adults on the sidelines, who say they would reenter the labor market if conditions improved, and part-time workers, who would prefer full-time positions, the unemployment rate becomes nearly 15%.
Adults who have quit looking and left the labor force altogether are responsible for 99% of the reduction in the unemployment rate from 10% since October 2009.
Many adults have reason to be discouraged. New jobs pay lower wages than did those lost during the recession, and job openings remain scarce.
New policies favoring bank consolidation limit access to credit for small and medium-sized businesses, and government health insurance mandates drive up the hiring costs. Together, those significantly discourage job creation in manufacturing and many service activities.
In the second quarter, the economy expanded at an anemic 1.5% annual pace and added only 75,000 jobs per month, as pessimism curbed consumer spending and the growing trade deficit continued to pull down demand for U.S. goods and services.
Longer term, the economy must grow 3% annually to keep unemployment steady, because advances in technology permit labor productivity to increase 2% each year and population growth pushes up the labor force about 1%.
The economy must add 13 million jobs over the next three years -- 361,000 jobs each month -- to bring unemployment down to 6%. To accomplish that, GDP would have to increase at a 4% to 5% pace. That would be possible after a long deep recession except for chronically weak demand for U.S.-made goods and services.
The $600 billion trade deficit gap -- driven almost entirely by imports of oil and consumer goods from China -- is a major drag. Each dollar sent abroad that does not return to purchase U.S. exports is lost demand for U.S.-made goods and lost jobs.