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Recovery won't improve unemployment


Optimism about the economy may be growing, but don't expect that to mean job growth, too

NEW YORK (Fortune) -- The mood regarding the U.S. economy may be inching, ever so slowly, toward optimism. But don't expect to see much improvement on the jobs front anytime soon. The economy's following a script for a jobless recovery, and unemployment is likely to stay high, if not get slightly worse.
The Congressional Budget Office painted a worsening picture for joblessness on Tuesday: The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011.

So how can there be a recovery without job growth to go with it?

To start, companies were unusually quick on the trigger initiating massive layoffs during this downturn. But they're unlikely to be equally zealous about hiring people back, especially since productivity is so high right now. The Labor Department reported that non-farm productivity grew at a 6.4% annual rate in the second quarter, the largest gain since the third quarter of 2003.

This is a direct result of people working harder for fewer hours. The same Labor Department report said hours worked, as reported by businesses, went down 7.6% in the second quarter. And as companies need to ramp up capacity as the economy recovers, they're more likely to roll back their furlough policies and add hours to current workers' schedules than hire new bodies.
All of this means that even as corporate earnings beat analyst estimates -- as we've seen recently -- better numbers won't necessarily translate into any hiring sprees anytime soon.

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Marek Matuszewski - Vice-President of Board