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Unemployment to Peak in 2010 – But Jobless Rates May Remain

An unemployment report from the U.S. Conference of Mayors indicates that the nation’s jobless rates will probably remain high for several years to come. The Mayors worked in conjunction with the Global Insight research group to publish their report one day ahead of a scheduled meeting with President Obama in Washington.

The report predicts that the jobless recovery rate will take a long time to turn the market around in the current climate of double-digit unemployment. With national unemployment rates now at 10% or higher it could be many more years before jobless rates regain the single digit numbers of the last decade.

The Mayor’s report said that cities across the country have been suffering with this growing recession since 2007 and according to recent Labor Department statistics, 17 metropolitan areas in the nation had unemployment rates topping 15% during November of last year. While unemployment rates in areas like central California and Nevada are likely to remain around 10% until 2013, the mayors group has asked the president to include direct fiscal relief to cities in the new budget he will introduce in February. The group has also asked for some of the money now being repaid to the federal Troubled Asset Relief Program (TARP) to be redirected to helping small businesses.

Local government groups have been asking president Obama to allocate money directly at the local level ever since the $787 billion economic stimulus plan began sending cash to cities through state governments a year ago. Current figures show U.S. cities account for 86% of all employment and 90% of the total economic output.

The report said that while it is likely that the traditional manufacturing centers in the Midwest will continue to be saddled with high jobless rates for the next five years or more, other areas of the country might begin to see their rates fall a bit below 5 percent within the next year. According to the report, the Mid-Atlantic States, including the nation’s capital, could regain an unemployment rate of 4.3% within the next three years. The report also estimated that some specific urban areas like Boulder, Colorado, and Honolulu, Hawaii will probably still suffer along with slightly higher jobless rates that approach 5%. Across the entire country, there were only eight metropolitan urban areas that experienced any significant growth last year.

The Mayor’s group report concluded that efforts to reduce the human and economic burdens of unemployment need to be targeted directly at the major metropolitan areas where the greatest portions of the labor force have been traditionally underutilized and that it is exactly those specific areas that have been unable to contribute to the nation’s economic growth overall.

In a new report published by the World Bank, “Global Economic Prospects 2010″, many international economists believe the worst period of the world financial crisis is probably over, but emphasize that the overall global economy is still very fragile at this time. The World Bank reports that the world economy will take at least half a decade to recover from the extensive damage that most every financial market has suffered in the last two years. The Bank also offered advice to developing nations suggesting that they try to strengthen their own domestic financial markets as quickly as possible in order to prevent facing severe capital shortages in the near future as the global economy makes a slow crawl toward complete recovery.

The World Bank report says the effects of the current economic crisis could forever change the global financial system and might limit overall economic growth for the next decade. World Bank officials also stated that they expect worldwide recovery will likely be lethargic during the second half of 2010 as the effects of prior fiscal policies slowly diminish and fade away. It is also expected that low demand in the private sector along with the existing high unemployment rates might also have a retarding effect on global recovery.

Most experts agree that over the next decade almost all developed nations will move toward tightening the laws and regulations regarding the management and supervision of their financial institutions. A total global financial recovery will most likely be negatively impacted by the large number of developing nations that will have to deal with the increased costs of borrowing foreign capital in the future. The Bank suggested that developing nations should aim to reduce their domestic borrowing costs and promote their own capital assets through the expansion of regional financial centers.

Although making significant improvements to the regulation of local banking sectors within developing nations will probably take a few years to implement, the result should increase the ease of access to capital and help put those countries back on the track to economic expansion and lower unemployment rates worldwide.