Unemployment will peak soon, but full recovery will take years
In 2010, look for a sign of prosperity that we haven't seen in years. It reads "Now Hiring." The first quarter should mark a turnaround in the labor market, as unemployment peaks at around 10.5 percent. Finally, we should see net job gains. But make no mistake: A full recovery is years away.
More than 7 million jobs have vaporized since the start of the fierce recession of 2007-2009. About 27 million Americans are unemployed or underemployed, including those who have given up looking for a job and those working part time when they'd prefer full-time employment. A law passed in November extended jobless benefits by 14 weeks for people whose checks would have otherwise run out, and by 20 weeks for people in more than two dozen states with unemployment above 8.5 percent, including California, Florida and New York.
Nationwide, the unemployment rate won't fall back below 6 percent until at least the end of 2012 -- and probably later. "When you're starting at over 10 percent, it takes a lot of growth to whack that down," says economist Michael Montgomery of IHS Global Insight. In 2010, we expect the economy to grow at a moderate 2.5 to 3 percent rate, on average.
There are signs that we're moving in the right direction. A recent survey of the National Association for Business Economics found that the percentage of firms adding jobs doubled from an all-time low of 6 percent in July to 12 percent in October. Temporary-help services, typically among the first labor groups to turn positive in a recovery, added 34,000 jobs in October.
Through September, employers had announced plans to hire nearly 170,000 workers -- more than were hired in all of 2008, according to the outplacement firm Challenger, Gray & Christmas. The government and nonprofit sectors announced 28,500 openings. A recent survey by ExecuNet found that headhunters expect the most high-level job opportunities to be in health care, green technology and energy.
According to IHS Global Insight, only eight states will see unemployment below 7 percent by year-end, including North Dakota, at 4.8 percent. Maryland and Virginia, bolstered by high technology, will finish 2010 at 6.7 percent and 6.4 percent, respectively.
Sixteen states will finish the year with unemployment rates above 10 percent; Michigan could hit 15 percent, and California 12 percent.
If you're lucky enough to have a job, don't look for much of a raise. Salaried workers can expect a 2.6 percent bump this year, according to Hewitt Associates. Energy companies will be among the most generous (3.7 percent), while industrial machinery and equipment companies expect to raise salaries by just 1.6 percent.