WASHINGTON – Nearly one in 10 U.S. workers will be unemployed before the job market starts to improve, economists in a USA TODAY survey predict. Most expect continued deterioration in the overall economy over the next six months.
The unemployment rate will peak at 9.8 percent, according to their median forecast, up a full percentage point from the prior survey in January. Twenty-one economists predict the unemployment rate will top out at 10 percent or higher, according to the survey of 51 economists by USA TODAY April 16-22.
Economists also predict the jobless rate will rise for a longer time. Two-thirds say it won’t stop rising until 2010 or later, vs. 51 percent in January.
The unemployment rate in March was 8.5 percent, the highest in a quarter-century. The rate of underemployment – adding in part-timers who wanted full-time work or those who had stopped looking for a job – hit a record 15.6 percent.
“Even after we come out of the recession I expect the unemployment rate to go higher and stay there for a while,” says Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. Given the severity of the downturn, he says, “Firms are going to proceed with caution when it comes time to staff up.”
Fifty-eight percent of the economists surveyed said the economy will weaken in the next six months, albeit at a slower pace, while the rest forecast an improvement.
“I don’t think we are out of the woods yet,” says Tucker Hart Adams, owner of The Adams Group, an economic consulting firm. She says the weak housing market and high consumer debt will continue to act as a drag on consumers and the overall economy.
But Richard Yamarone, director of economic research at Argus Research, says the huge amount of fiscal and Federal Reserve stimulus will help the economy turn the corner later this year. Other positives include lower energy prices and rapid inventory liquidation in recent months that will force businesses to replenish shelves soon.
Still, “Even when the economy does turn … we’re not going to be getting blockbuster numbers by any stretch,” Yamarone says. “It is going to be a very fragile recovery because the job loss has been so incredible.”
Federal Reserve policymakers, who meet Tuesday and Wednesday, will hold their target for short-term interest rates near zero for another year, the economists predict.
By Barbara Hansen, Barbara Hagenbaugh