WASHINGTON -- Even as the nation'seconomy begins clawing its way out of theworst recession in 60 years, there are growingsigns that this recovery could comewith an unsettling twist: The wheels ofcommerce may begin to turn again withoutany substantial boost in jobs.
Not only is the unemployment rate --now 9.4 percent -- likely to climb into doubledigits, it is expected to remain there wellinto next year or possibly longer, economistssay, prolonging the misery of the unemployed,squeezing retailers and otherbusinesses, and adding millions of dollarsin government costs and lost productivity.It could even threaten the recovery itself.
While it's common for the jobless rate tokeep climbing for a time after economicoutput turns positive, the last two downturns,in 1990-1991 and 2001, introduced theidea of a "jobless recovery": Many unemployedworkers found that jobs as good asthe ones they had lost were almost impossibleto find, even though the overall economyimproved.
This time, many economists say, thereare new factors that could make the problemworse:
Many more layoffs in this recession havebeen permanent, not temporary. And masslayoffs are continuing at a record pace; lastmonth they cost nearly 313,000 workerstheir jobs.
Also, instead of shrinking operations,companies have shut down whole businessunits or made sweeping structural changes,such as General Motors and Chryslershuttering hundreds of dealerships andCitibank and Bank of America cutting tensof thousands of positions.
In addition, workers who survived jobcuts are, on average, working fewer hoursper week than ever before, according to LaborDepartment statistics. That means employers,even after they feel confidentenough about the recovery to expand, willbegin by giving more hours to existing employeesinstead of hiring new ones.
More troubling still is the outlook for consumers.The depth of this recession, pluswidespread expectations that unemploymentwill keep rising into mid-2010 and remainhigh thereafter, may exert a powerfuldrag on the recovery.
Shortly after the 1990-1991 recession, saidRichard Curtin, director of the University of Michigan consumer sentiment survey,consumers went out and bought houses,cars and other expensive goods on credit.That helped boost job growth in construction,manufacturing and other industries.
But this time around, because of the severecredit crunch, people won't be able toget financing as easily, while many otherswho can borrow will be reluctant to do so,Curtin's surveys indicate.
Instead of leading the way to a more vigorouseconomy, consumers are saying theywant to save and keep their personal debtslow. Americans socked away almost 7 percentof their after-tax income last month,the highest rate in 15 years.
"What this means is that we're going tohave a slow-growing consumer sector," saidCurtin. So even though the federal government'sstimulus spending is likely to pickup some of the consumption slack next year,he said, "spending is expected to slow downin 2011 and disappear in 2012."
That's what scares Howard Roth, chiefeconomist at California's Department of Finance.The nation's biggest state has beenhit particularly hard by the housing meltdownand its jobless rate is already hoveringat 11.5 percent.
"If you look at the situation of consumers-- home equity, it's gone away. The stockmarket has wiped away retirement savings.... The consumers are not going to be able tospend as much as before," Roth said.
Analysts say there are factors that couldmitigate the jobless recovery. Health careand government employers are expected tocontinue hiring. Green industries areemerging and will need more people.
What's more, companies today aren't seeingthe kind of sharp gains in productivitythat previously allowed them to expand outputwithout adding workers; so this time, ifa company wants to produce more, it mayhave to hire more workers.
And, with wages depressed because morepeople are unemployed and older people arestaying on the job because their retirementaccounts have been wiped out, adding to thework force will be cheaper.
Still, the demographics may work theother way too.
At Quality Float Works Inc., a Chicagoarea manufacturer of industrial floats andvalves, employment has shrunk to 15 from20 a year ago. Some of the remaining employeesare older workers, who in ordinarytimes might have retired, said Sandra Westlund-Deenihan, the company's president.
"Their 410(k)s became 201(k)s. Theystayed on with us," she said. When they areready to leave, she added, it will create awave of openings -- but just when that willhappen is anybody's guess.
Her son, Jason Speer, the company's vicepresident, says he'll wait for several monthsof stable business before he even considershiring. And that point hasn't come. "We'renot there yet," he said.
For workers, "it's going to be a difficultslog back," said Sophia Koropeckyj, a managingdirector at Moody's Economy.com.
While the economy is expected to growagain later this year, analysts say, it won't beuntil 2011, at the earliest, before there'smeaningful job growth.
All this spells trouble for the Obama administration,which is facing increased pressure to show results from its wide-rangingstimulus package and other interventionin the economy.
Since the recession officially began in December2007, the U.S. economy has lostsome six million payroll jobs. It would havebeen much worse without Obama's $787 billionstimulus plan, says Jared Bernstein,chief economist and economic policy adviserto Vice President Joe Biden.
By the end of next year, he said, the Obamaadministration's recovery efforts willhave created or saved 3.5 million jobs -- afigure that analysts say is a reasonable estimate,though it has been sharply criticizedby Republicans.
But that leaves a huge jobs deficit. Bernsteindeclined to give a forecast of unemploymentand the economic recovery, sayingthey will be addressed in a White Housereport to be released later this summer.
Until job growth revives, the administrationis extending unemployment benefitsfor workers and investing $4 billion intoworker training programs.
Obama also promotes a surge in "green"jobs as a result of his policy. But most analystssay it will take several years before asubstantial number of such jobs begin to appear.Expectations in manufacturing aren'thigh either. Factory payrolls never reboundedafter the 2001 tech-bubble recession,in large part because jobs were permanentlylost to foreign rivals or productivitygains.
This time may be no different, with hundredsof thousands of jobs having been cutin automotive and related industries.
Construction and finance payrolls alsoare likely to remain subdued, along with retailand trade.
All of which leads Kim Megonigal, chiefexecutive of Kimco Staffing Services of Irvine,Calif., to ask: Which sector is going tolead the recovery?
"I don't see any job drivers other thangovernment," said Megonigal, whose firmhas 25 offices in California. "A year ago, wewere filling 600 jobs a week," he said. "We'redown."
Temporary-help firms are often the firstto see evidence of a rebound in jobs after arecession. But Megonigal doesn't see anythingstirring at the moment. He says hestarted his firm in 1986, but has never seenanything like this.
"Employers are telling us to wait, theydon't know. It's a lack of confidence."