Why is U.S. Unemployment so High?
Well, we had stimulus spending and some say that we are starting to see an economic recovery. However, others are questioning this since unemployment is still so high. Peter Orszag, Director of the Office of Management and Budget, explained it this way during a Charlie Rose interview.
Orszag stated that he sees the economy as improving but the unemployment rate will remain high for some time to come. This is in accord with most economists’ belief that employment is a lagging indicator in a recovering economy–the stock market might go up, businesses may see improvement, but hiring is put off until the recovery has long been underway.
However, Orszag said that the current unemployment rate is 1.5% higher than would be expected in a more traditional recession. He listed two factors for this: First, pensions are largely a thing of the past; more U.S. citizens now depend on a 401K for their retirement. However, with the fall of the stock market, the amount in 401Ks has decreased drastically, and many, by necessity, are postponing retirement and staying in the workforce.
Second, in past recessions, many moved to other locations to accept a job offer. However, this time around, plunging house prices make it difficult for homeowners to sell their homes and seek employment elsewhere. The result is that fewer of the unemployed see moving as an option in this recession than in past recessions.
Orszag also said that without the stimulus spending the economy and the job situation would be worst than it is now and that the affect of stimulus spending was designed to reach a peak at the end of this year and early 2010.