The Plain Dealer had an interesting article on unemployment and the fact that numbers may not drop until 2013. Gone are the days of rising home values and 5 percent unemployment. Today, we top double digit unemployment rates and homes that may never reach the value they had five years ago for another decade.
As for companies in Northeast Ohio, we’ve noticed a sharp increase in the use of temporary or contingent workers as a result of the rising unemployment numbers.
Take a look at the article from the Plain Dealer by By Teresa Dixon Murray. Let us know what you think.
CLEVELAND, Ohio — While the financial world is finally improving, the economy in the years ahead may not look anything like the economy of the past, an executive with the Federal Reserve Bank of Cleveland said Tuesday.
Further, getting to the point of the so-called recovery may take longer than some experts predict, according to Mark Sniderman, the bank’s executive vice president and chief policy officer.
“I don’t think many of us believe that the new normal will be the same as the old normal,” Sniderman said at a luncheon sponsored by the Greater Cleveland Mortgage Bankers Association. About 45 people, mostly bankers and real estate professionals, attended the Union Club event.
The old norm was 4 percent to 5 percent unemployment (today it is nearly twice as much), rising home values and economic growth of 3 percent to 4 percent. It also meant a zero savings rate and mortgages that were many times larger than a person’s salary.
Sniderman noted that 2010 was less chaotic than 2009, but even now, “this hasn’t felt like much of a recovery.”
This has been the slowest recovery following a recession since World War II, he said.
Consumer spending remains tepid, people are saving more, and companies are still hesitant to hire, he said.
Sniderman was perhaps most pessimistic on the last point. The unemployment rate remains at 9.8 percent, with 15 million people looking for work. That’s nearly twice as many as were looking for work in 2007.
He expects unemployment to stay above 8 percent until at least 2013. That’s a grimmer view than some other experts have projected in pointing to better numbers by early next year.
Sniderman said the new normal for unemployment might be more like 5 percent to 6 percent, about a percentage point above historical norms.
Sniderman pointed out that his views don’t necessarily reflect the views of others at the Cleveland Federal Reserve or at the Federal Reserve Board.
Also sobering: Home prices, which had increased, have retrenched in recent months.
Sniderman does predict that inflation will remain below 2 percent for at least the next two years, but he noted that he thinks inflation is too low.
He said he supported the Fed’s controversial wide-scale purchase of Treasury bonds, although he said others have legitimate concerns about whether the purchase will help interest rates or cause inflation to spike or whether the economy was already on the mend without the move.
