Unemployment Outlook Still Uncertain

July 1, 2009

Despite continued sluggishness in the economy and the recent upheaval in the auto industry, unemployment claims are down. Senior Fellow Gary Burtless says employers are still shedding jobs but says the stimulus program and the growing need for workers in some expanding industries are critical in the effort to stabilize the economy.


“The economy has improved in the sense that it is declining more slowly now than it was at the end of last year and the beginning of this year. Job losses in May were only about half as high as they were on average in the previous six months. The number of new claims for unemployment benefits, which is still running at a staggering rate of 600,000 every week is however lower than it use to be at the beginning of the year, and that is a sign that the pace of layoffs is slowing down, but that doesn’t mean that we can anticipate a lower unemployment rate anytime soon. It simply means that the rate at which companies are laying off their workers is a little bit lower than it was earlier in the year also the loss of payroll jobs is not nearly as bad as it was in January.”

“…My reading is that the stimulus program is working. It’s just working in the context of an extremely weak and weakening economy. It’s preventing the weakening from getting worse at an even faster rate, as I think I may have mentioned, the pace of the worsening of the job market is not as bad as it was earlier this year and last year, and one reason may be the massive amount of stimulus that is now being injected into the economy. Not much of the seven hundred and eighty seven billion dollars that the Congress appropriated for the stimulus package has been spent so far, but still most of us who work are seeing our pay checks go up a little compared to where they were at the beginning of the year because the tax cut is already being reflected in our paychecks. In addition, a lot of workers who have exhausted their unemployment benefits are still collecting unemployment benefits and that too is putting spending power in the wallets of a lot of families that would be very very hard pressed given how hard it is to get another job.”

“…A lot of the good jobs that Americans held as recently as a couple of years ago are probably gone forever. There is a pretty big chunk of auto production and all the industries that produce supplies for the auto industry that are going to have to cut back employment permanently. The companies have gone bankrupt. The new companies that are being created in their place will not need as many workers to produce cars and produce the parts for cars, the steel for cars, the leather for the interiors, the tires, and so on. Those industries are shrunken I think for good. They are not going to come all the way back to where they were at their previous peak. On the other hand, there are some industries in the United States that continue to grow, and a lot of jobs in those industries are pretty good ones. There is the health sector and the there is the education sector. The government sector has also tended to see gains in employment over the last year and a half while the rest of the economy has been shrinking.”