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CNN: Unemployment Can’t Go Much Lower

From CNN’s Money.Com:

Unemployment rate: How low can it go?

By Annalyn Censky
April 4, 2012

NEW YORK (CNNMoney) — The unemployment rate has fallen dramatically over the last six months, but just how low can it go?

Hilarious. Over the last six months, the unemployment rate has gone down a whopping .7%, from 9% to 8.3%. That is not even a full percent.

The answer is being debated among two camps of prominent economic thinkers. One school of thought says that unemployment will return to around 5% as the economy eventually recovers. But an opposing view states that permanent changes in the labor market mean higher unemployment is here to stay.

The new ‘normal’ in the golden age of Obama.

Among those who believe the first, more optimistic scenario is Federal Reserve Chairman Ben Bernanke. He thinks that unemployment will fall as part of the regular business cycle, and stimulative policies that boost demand could bring us back to a more normal unemployment rate of between 5% and 6% some time after 2014

After all, Obama’s “stimulative policies” have driven the unemployment rate down from 8.3% in February 2009 to the 8.3% it is today.

But this is the supposedly ‘optimistic’ school. And notice how even they are calling for still more ‘stimulus.’

Under the second, far less rosy scenario, 5% unemployment is out of reach. Devotees of “structural” unemployment, believe permanent shifts mean the job market may never fully recover, even as the broader economy does.

Nobel Prize winning economist Edmund Phelps, for example, calls a return to a 5% unemployment rate a “pipe-dream.”

Phelps likens the economy to a skater who’s taken a bad fall. Just getting a boost might not be enough, because the skater may have a few broken bones. What are those broken bones?

Less innovation, increased competition from low-wage countries, more efficient technology and a shortage of high-tech skills among American workers may all be to blame.

Another problem: Baby Boomers are working longer than their predecessors, creating a demographic shift in the labor market. Plus, many Americans are finding themselves in the wrong place at the wrong time

All of these factors are a recipe for a longer lasting shift in the labor market, and mean stimulative policies won’t have much of an impact, according to the structuralists

Note the conspicuous absence of any blame on Obama, or the fallout of high taxes and the threat of high taxes. Or Obama-Care. Or intrusive regulations and paperwork.

According to CNN the problem is the American workforce. We are just too stupid and we work too long for unemployment to ever get down to 5%. (Which is where it was in April of 2008. In fact, the jobless rate was often as low as 4.4% under Bush.)

So just how much further will unemployment fall?

The Labor Department will release March’s unemployment rate on Friday. Economists surveyed by CNNMoney are expecting the report to show the unemployment rate remained at 8.3% for the month.

Longer term forecasts are all over the map. The Congressional Budget Office predicts that the unemployment rate will eventually fall as low as 5.3%, but not until 2021.

Hilarious. Especially, given the CBO’s track record for predictions. In any case, it’s clear that all of this is to prepare us for the report this Friday on March’s unemployment rate.

If it stays the same or goes up even after it has “fallen dramatically” for the last six months, we should not be shocked. And if it goes down (after being ‘seasonally adjusted’ of course), then a true miracle has occurred.

Economists at Goldman Sachs, however, estimate that due to structural reasons the new normal unemployment rate may now be 6% at best

Wait. Doesn’t predicting 6% unemployment puts them in the first, optimistic camp? (“Stimulative policies that boost demand could bring us back to a more normal unemployment rate of between 5% and 6%.”)

“If progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further possibly converting a cyclical problem into a structural one,” Bernanke said last week.

And we thought Bernanke was the ringleader of the optimists camp? Oh, well. It’s CNN, after all.

But never mind. The important thing to remember is that Obama is in no way to blame. He is only to get credit when the jobless rate goes down.

This article was posted by Steve on Wednesday, April 4th, 2012. Comments are currently closed.

3 Responses to “CNN: Unemployment Can’t Go Much Lower”

  1. AcornsRNutz says:

    What a wordy way of saying something pretty obvious. The economy remains in the toilet, and without massive regulatory reform (ie gettting rid of a large portion of the regulations and the agencies responsible for them) and a firmly established and simplified tax code, we will be stuck with this mess.

  2. GetBackJack says:

    I wonder what CNN is going to label Unemployment when people can no longer afford electricity or cable and their viewership drops to 300, and CNN goes bankrupt because all their advertisers have gone out of business?

  3. MZmaj7 says:

    “Over the last six months”?? Over the last YEAR, “the unemployment rate has gone down a whopping .7%.”

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