The U.S. housing bust and auto sector upheaval have left hundreds of thousands of workers looking for jobs in the same sectors, in the same places, and at the same time.

Some of these jobs won’t come back even after the recession ends because Americans are unlikely to buy as many new homes or cars as they did at the peak of the easy-money days.

The result is that it may be several years before the United States returns to full employment — and even then the jobless rate may not get back to the low 4.9 percent level where it stood when the recession began in December 2007.

“I don’t think we’re going back there any time soon,” said James Galbraith, an economist who teaches at the University of Texas’ LBJ School of Public Affairs. He thinks unemployment may stay “close to 10 percent for quite a long time.”

Persistently high unemployment would be problematic for President Barack Obama, who has made creating or saving jobs the measure of success for a $787 billion stimulus package.

It would also complicate policy for the Federal Reserve, the U.S. central bank, which is supposed to promote full employment and keep inflation in check. Eventually, the Fed will want to raise short-term interest rates from their current level near zero, but it will be hard-pressed to do so while the jobless rate remains abnormally high.

Unemployment normally rises in recessions. What makes the current episode worrisome is that the biggest job losses are heavily concentrated, both in terms of sectors and geography.

The worst of the auto sector job cuts are in the U.S. Midwest, and a large portion of the out-of-work home builders are in Florida and California. The areas with low unemployment include low-population states like Wyoming and South Dakota.

This suggests that not only are there too few jobs to go around, but there is also a mismatch between where the workers are and where the jobs are.

Source/Full Story:: Reuters

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