U.S. Joblessness May Reach 13 Percent, Rosenberg Says
“This is going to be the mother of all jobless recoveries,” Rosenberg, one of the first to forecast the recession in his former position as chief North American economist at Merrill Lynch & Co. in New York, said today in an interview on Bloomberg Radio. “At the beginning of the year, who was calling for unemployment to go up to 10 percent?”
Rosenberg said the recession, the deepest since the Great Depression, “is truly secular in nature” and said the economy is “in a post-bubble credit collapse.”
A 13 percent unemployment rate would be the highest since monthly records began in January 1948, according to Labor Department data. The previous postwar high was 10.8 percent in December 1982. Yearly records, which began in 1929, show joblessness climbed to almost 25 percent in 1933 during the Great Depression.
The rate exceeded 10 percent last month for the first time in more than a quarter century. The Labor Department reported Nov. 6 that unemployment increased to 10.2 percent in October, the highest since 1983, and payrolls dropped by 190,000 workers.
Additionally, the so-called under-employment rate, which includes part-time workers who’d prefer a full-time position, and people who want work and have given up looking, reached 17.5 percent last month, the highest level since records began in 1994.
Companies aren’t “cash constrained to hire workers,” and instead are being “cautious about economic bellwethers,” Rosenberg said. “It just comes down to the economic outlook,” he said.
The economy has lost 7.3 million jobs since the recession began in December 2007.
Commenting on the third quarter’s surge in worker productivity, Rosenberg said “we are producing more with fewer average hours worked -- how sustained is that is anyone’s guess.”
Productivity, a measure of worker output per hour, increased at a 9.5 percent annual rate from July to September as labor costs registered a record decline, the Labor Department reported Nov. 5.
The economy in the U.S. could rival Japan’s so-called “lost decade” of the 1990s, Rosenberg said. “This has some prints of Japan in many respects,” where growth stagnated for years and prices fell in the aftermath of speculation in real estate and equities, he said.
In the U.S., “20 percent of private credit is coming out of the system -- and on a semi-permanent basis,” as reflected in the record eight consecutive monthly declines in consumer credit through September, Rosenberg said.
Credit card, auto and other installment debt declined $14.8 billion, or 7.2 percent at an annual rate, to $2.46 trillion, according to Federal Reserve data released Nov. 6. The consecutive declines were the most since records began in 1943.
Government stimulus plans, such as the “cash-for- clunkers” auto rebates and tax credits for home buying, are “short-term policies that promote excess spending,” Rosenberg said. Growth in the third quarter would have been “barely above zero” without the government stimulus, he said. Spending on education and job training would be a wiser investment, Rosenberg said.
Moreover, the Treasury is “on an unsustainable fiscal path irrespective of where the economy is going,” Rosenberg said. The government reported a record budget deficit of $1.42 trillion in the fiscal year that ended Sept. 30.
In the third quarter, gross domestic product expanded at a 3.5 percent annual rate after a yearlong contraction, Commerce Department figures showed Oct. 29. Household purchases increased 3.4 percent, the most in two years.