Tags: Paulson | Years | Joblessness | unemployment

Hank Paulson: It Will Take Years for Joblessness to Improve

Wednesday, 15 Feb 2012 08:41 AM

Unemployment rates will take years to come down thanks to weak economic growth, says former Treasury Secretary Hank Paulson.

The unemployment rate fell to 8.3 percent in January from 8.5 percent in December, as the economy added a net 243,000 nonfarm payrolls, but joblessness numbers are still well above prerecession levels, when they were well below 5 percent.

The economy will need to grow at a quicker pace to absorb the large number of people in search of work, and that's not going to happen anytime soon.
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"I am encouraged by the recent economic news. But I think it's going to be a long slog. And I think it's going to be years before we get our unemployment to an acceptable rate," Paulson tells CNBC.

So what is an acceptable rate?

"I won't put a number on it, but it's a lot lower than it is now," Paulson says.

"Almost any economist would say it's going to take a higher growth rate than we've had to create the jobs we've created, and I've had a couple of economists say to me if you're going to back to 2010 when unemployment was the highest and then you said what growth rate would it take to create the jobs we've got today, they would say 5 percent."

In the fourth quarter of 2011, the U.S. economy grew by 2.8 percent.

"We haven't had that kind of growth and so to me, that's again rather troubling," Paulson says.

"I'm not being an alarmist. I just think that until we deal with the huge structural issues we've got and work across the aisle and compromise, we're not going to get the economy on the kind of sustainable growth track we need."

Some experts have pointed to political bickering and brinkmanship in the United State as a factor behind tepid economic recovery.

In 2011, Democrats and Republicans finally agreed on terms to lift the debt ceiling at the very last minute, narrowly avoiding default although Standard & Poor's stripped the country of its AAA rating due in part to the government's inability to tackle spending and deficit issues.

Fed Chairman Ben Bernanke has pointed out that unemployment rates are still unacceptably high.

"We have a long way to go before the labor market can be said to be operating normally," Bernanke told the Senate Budget Committee recently, according to the AFP newswire.

"Particularly troubling is the unusually high level of long-term unemployment. More than 40 percent of the unemployed have been out of work for at least 10 months."

Economists have pointed out that the economy will have to accelerate more not only to absorb those out of work, but also, to absorb those who have quit looking for work and will return to the labor force when better days return.

Add to that, younger workers enter the labor market for the first time ever each year, and will put added pressure on the economy to create more jobs.

"We've been here before with 200,000 plus monthly gains in payrolls in spring 2010 and spring 2011 that ultimately came to nothing," Toronto-based Capital Economics said in a note to clients, CNBC reported recently.

"With housing still in the dumps, fiscal policy being tightened and the eurozone crisis likely to flare up again at any moment, we still think the U.S. will endure another year of weak growth in output and employment."

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Wednesday, 15 Feb 2012 08:41 AM
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