Economist: High Unemployment to Last

(AP Photo/Damian Dovarganes)

If you're looking for good news on unemployment, Moodys.com chief economist Mark Zandi doesn't have it.

Zandi told CBS' "The Early Show" Monday that the nation's near 10 percent unemployment rate will "stay there through this time next year."

However, the economist said, "we're heading in the right direction."

Zandi's comments come on the heels of two drastically different business reports.

Sunday, major lender CIT Group filed for bankruptcy, while Ford Motor Company Monday announced it earned a $1 billion profit in the third quarter.

CIT received $2.3 billion last year in government aid from bailout funds, but after being denied another bailout by the government, the company was forced to file chapter 11 — spawning the 5th largest bankruptcy in us corporate history and marking the first time the government has lost money through the TARP program, reports CBS News correspondent Kelly Wallace.

The lack of jobs became a contentious issue last week with the White House's claiming that stimulus spending directly created or saved about 650,000 jobs.

Critics question how can anybody can claim success when unemployment is almost 10 percent, but the Obama administration also said Friday it is on track to reach the president's goal of 3.5 million jobs by the end of next year.

New job numbers from businesses, contractors, state and local governments, nonprofit groups and universities were released publicly Friday afternoon on Recovery.gov, the Web site of the independent panel overseeing stimulus spending. It showed 640,329 jobs created or saved directly through federal contracts.

The result of all the discrepancies: stocks plunged Friday, erasing all of the previous day's big gains, as a drop in consumer spending fueled worries that the economic recovery won't continue.

[maiingan]

It is more urgent to end long-term unemployment than it is to increase the total number of jobs in America. If unemployment were distributed equally, everyone in the workforce would be unemployed for only the percentage of each year corresponding to the official unemployment rate. We could tolerate this financially. Most importantly, the economy would be better off for all.
There are three ways this country can do this.
First, irresistible incentives must be offered to employers to hire, first, unemployed people who?ve run out of unemployment compensation, those whose benefits are less than the minimum wage, and employed people whose pay amounts to less than full-time pay at minimum wage. These incentives cannot be received until after the employee has at least a full year of full-time pay in his regular benefit year used to calculate unemployment compensation, and has given his written approval.
Second, job-sharing groups must be formed which include unemployed people, so that all will rotate in and out of the jobs and all will be furloughed for an equal span of time.
Third, a new WPA must be created. The goal of the original WPA ?was to employ most of the unemployed people on relief until the economy recovered.?1 Now, there is no ?relief? available to adults who are neither disabled, senior citizens, nor caring for dependent children under 18. Unemployment compensation isn?t guaranteed to either last until the economy recovers, or provide an income at least equal to the minimum wage. Its incentive to seek work is a cruel tease with neither enough jobs for all who need them, nor equally strong incentives for employers to hire the unemployed first.
Harry Hopkins, creator of the original WPA, ?believed that the work provided by the WPA should match the skills of the unemployed.?2 This must be done now. People know the variety of things they can do, and don?t want to earn a living by featherbedding. People whose skills are fully employed contribute the most to the economy. Involuntary underemployment (a negative output gap for an individual) increases the unjust concentration of wealth and income.
Notes:
1. http://en.citizendium.org/wiki/WPA
2. http://eh.net/encyclopedia/article/couch.works.progress.administration