Tuesday, October 20, 2009

High unemployment might be normal in the United States

Some cheery news from the AP. Don't get all excited at once.

WASHINGTON – Even with an economic revival, many U.S. jobs lost during the recession may be gone forever and a weak employment market could linger for years.
That could add up to a "new normal" of higher joblessness and lower standards of living for many Americans, some economists are suggesting.

The words "it's different this time" are always suspect. But economists and policy makers say the job-creating dynamics of previous recoveries can't be counted on now.

Here's why:

• The auto and construction industries helped lead the nation out of past recessions. But the carnage among Detroit's automakers and the surplus of new and foreclosed homes and empty commercial properties make it unlikely these two industries will be engines of growth anytime soon.

• The job market is caught in a vicious circle: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring.

• Many small and midsize businesses are still struggling to obtain bank loans, impeding their expansion plans and constraining overall economic growth.

• Higher-income households are spending less because of big losses on their homes, retirement plans and other investments. Lower-income households are cutting back because they can't borrow like they once did.

Now obviously we can't make any comparisons to the Great Depression because if memory serves me right, unemployment was somewhere around 25 percent. As gloomy as it may seem, it's not that bad in America right not. It's crummy, but we could bottom out some more.

I think what Americans will have to come to grips with is that the quality of life in this country will drop for the first time rather than get better. Blame whoever you want, but I believe its a collection of issues that have hit us all at once and now we're going to have to figure out a way to make things work again.

Considering the amount of waste in this country, it almost seems as if the economy is fixing itself by cutting some fat. However, that fat is needed in the pocketbooks of many people and it's just not there anymore.

We're in for a long road, but in order for us to get out of this, the US is going to need to figure out how to survive - not just figure out a way to get back to the economic bubble of the 90s. That model just doesn't work anymore.

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