“Jobless recovery” has become almost synonymous with “American economy” this year, as financial conditions seem to somehow improve without creating much work for anyone.
This week, Americans will find out whether the nation is producing ever more goods and services without generating any jobs, or at least not enough of them, to drive down the unemployment rate.
On Thursday, the government will announce the number of new weekly claims for unemployment benefits.
But the star report of the week is the closely watched unemployment rate for October, scheduled to be released Friday. A decrease in the nation’s 6.1 percent unemployment rate would be good news, but not necessarily that significant.
“We need to see the unemployment rate coming down for several consecutive months” to say labor conditions are improving, said Jared Bernstein, senior economist with the Economic Policy Institute.
“The forecasts you see show unemployment sticking at 6 percent this year and much of next year,” Bernstein said.
The problem is a virtue known as productivity, which can be defined as producing more goods and services with a stable or declining number of workers. The U.S. has been a paragon of productivity for years, as employers and workers learn to do more with less.
“As long as productivity is growing at 2.5 [percent] or 3 percent, the economy has to grow at least at that rate to create any jobs,” Bernstein said. “To lower unemployment, you have to grow even faster.”
Bernstein is expecting the gross domestic product to grow slightly faster than productivity, but probably not enough to lower the unemployment rate.
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MANUFACTURING
Erosion slowing
Manufacturing is the sick man of the economy, having lost millions of jobs in recent years.
Several reports due this week will hint at whether manufacturing is regaining its health.
On Monday, auto and truck sales and construction spending will be released. On Wednesday, it’s factory orders.
Vehicle sales have remained relatively strong, preserving thousands of good-paying jobs. Factory orders, on the other hand, have been abysmal.
“We may at least see the continuing erosion of factory jobs stop,” said Russell Sheldon, managing director and senior economist for BMO Nesbitt Burns. “Certainly, the construction industry looks good.”
While technically not considered manufacturing, construction depends on an almost infinite variety of manufactured goods, from garbage disposals to bulldozers. Strong construction spending helps support manufacturing.
Sheldon said recent manufacturing surveys in Chicago and Philadelphia were encouraging. And other economists say the declining value of the dollar against the euro is making American-made factory goods more competitive.
“There is a reasonable case to be made that … we are no longer declining,” Sheldon said.
ILLINOIS VIEWPOINT
Track record lags
So is Illinois, where manufacturing remains important, poised for an upswing?
Well, it would be nice if that happened, but the state’s unemployment rate rose to 7.1 percent in September.
Mitch Daniels, a labor market economist with the Illinois Department of Employment Security, is optimistic.
“We do feel that we are on the brink of a turnaround and some job growth,” Daniels said.
He noted that mass layoffs, defined as an employer eliminating 50 or more jobs at one time, are becoming less common. And recently the state saw some employment growth in retail trade and health services.
But Illinois’ track record on recovery from recession is not reassuring. Historically, the state lags behind the nation in employment growth after a period of economic stagnation ends.
“Will we lag as we did in the recession of 1991-1992?” Daniels said. “I would have to say yes.”