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What type of 'jobless' recovery?


...Cutting costs

"If you are a U.S. manufacturer, you can't raise prices. The only way to increase profits is to cut costs," he says. One way to do that is to move production overseas.

Achuthan says that nonmanufacturing employment recovered quickly after the previous two recessions, but those gains were overwhelmed by job losses in manufacturing. "Ten years ago we had 18 million manufacturing jobs. Today we have 12 million."

In a study, Erica Groshen, a vice president with the New York Fed, found that during the past two recessions, about three-quarters of job losses were "structural," or permanent, and only one-fourth were "cyclical," or temporary.

In previous recessions, the split was closer to 50-50. The preponderance of structural adjustments would help explain why employment languished during the past two recoveries, she says.

Will we have another jobless recovery?

Most experts say yes, but disagree on how long it will last.

Steep recession

The recession that started in December 2007 has been long and hard. U.S. unemployment was 9.5 percent in June. Often, robust recoveries follow steep recessions.

What's different this time is that consumers, who are deeply in debt and have watched the value of their homes and investments plummet, might spend less than they normally would in a recovery, keeping a lid on job growth...

A big question is whether the stimulus act will ever create jobs.

Achuthan believes the recession will have ended by Labor Day. He predicts that nonmanufacturing employment will begin growing before year end, led by construction, retail and business and temporary services.

But the unemployment rate won't peak until next year, as manufacturing continues to shed jobs and more people enter or re-enter the labor market. He envisions a jobless recovery, though not as long as the last two...."
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