Unemployment Rate Could Hit 10 Percent
STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. Good morning. Renee Montagne is away today. I'm Steve Inskeep.
The government issues its September report on employment later this morning. And for those looking for a job, the news is expected to be grim once again. NPR's John Ydstie is with us to talk about jobs and unemployment. John, Good morning.
JOHN YDSTIE: Hi, Steve.
INSKEEP: What are you hearing from economists?
YDSTIE: Well, a Reuters survey of economists is projecting about 180,000 jobs were lost in September and that the unemployment rate rose to 9.8 percent. But a private report, released by a company called ADP, estimates that over 250,000 jobs were lost in September. That would still be slightly less than were lost in August. But if the government report were that high, it would be a bit disappointing.
INSKEEP: We should note also, this is far slower than the job losses of six or eight months ago, at the height of the recession.
YDSTIE: Absolutely, that's improved a lot. Job losses are slowing significantly.
INSKEEP: Still, we do have a situation where the Fed Chairman, Ben Bernanke, says the recession is ending, but thousands and thousands of jobs are being lost - additional jobs being lost.
YDSTIE: You're right, that was the headline from Chairman Bernanke. But he also went on to say that unemployment would likely continue to rise. And the reason is that some sectors of the economy continue to slide. And in the areas that are growing, employers are holding off hiring until they're sure that there's not going to be backsliding. And that kind of thing could continue into 2010. A lot of people still expect the unemployment rate's going to rise to 10 percent or above.
INSKEEP: I'm just thinking of a store, maybe finally business is picking up again. They finally start re-stocking the inventory, they might buy more stuff, but they're not going to hire a bunch of sales clerks right away.
INSKEEP: So when can we expect job growth to start returning?
YDSTIE: Well, there's disagreement about exactly when, but probably several months into next year. And a lot of economists, including former Fed Chairman Alan Greenspan, think we'll have a spurt of growth in the next six months as business restock their inventories, like refilling the car lots after the Cash for Clunkers program.
But they think growth will slow down after that spurt, which could slow the growth of employment. And in fact, some respected analysts, including Bill Gross of the bond firm, PIMCO, think that we're in for a new normal - a growth in the one to two percent range, which would be much slower than we had before this crisis, barely enough growth to absorb new workers let alone push down unemployment.
INSKEEP: You mean like the increase in population.
INSKEEP: We're not even talking about getting everybody a raise with one percent growth here.
YDSTIE: Yeah, exactly.
INSKEEP: Well, and I'm thinking also of the early �90s, when there was recession not nearly as severe as this one now. And I think officially it was over in �92, but it was years after that before employment improved.
YDSTIE: Exactly. Job growth after that recession was very slow, and it's expected to be after this one.
INSKEEP: What is an unemployment rate that looks like it's going to stay near 10 percent mean for consumer spending, which is such a crucial part of the overall economy?
YDSTIE: Obviously, if people don't have work, they're not getting paychecks. And if they don't have paychecks, they're not going to be spending a lot. So that's a challenge, that's the big challenge for this economy and the reason people think it's going to be such a difficult slog to get out of it.
INSKEEP: John, at some point isn't there going to be some natural force that kicks in? People have deferred maintenance on their homes. They've deferred buying things they need to buy. They've deferred replacing the car. At some point you just have to go out and spend some money, even if you're trying to hold back and save as so many people have been.
YDSTIE: Well, exactly. That's the theory behind economic cycles. At some point, things have to improve, people have to spend money, businesses have to hire workers and things start to grow again. And we hope we are beginning that process right now.
INSKEEP: That's NPR's John Ydstie who covers the economy. John, thanks very much.
YDSTIE: You're very welcome.