The national employment situation has slowly been improving, but fundamental shifts in the economy may prevent a full recovery, a new Federal Reserve report concludes.
The “normal” unemployment rate, or the baseline level to which the economy is progressing, will be worse than it was before the recession, according to a report released this week by the Federal Reserve Bank of San Francisco. The new rate, about 6.7 percent, is significantly higher than the previous “normal” of about 5 percent, the San Francisco Fed said. A full recovery, in that case, would be a long time coming.
The current jobless rate, 9 percent, still elevated from the Great Recession, leaves out many more workers who have given up searching for employment. As business try to do more with less, as workers gradually lose skills and as the available jobs change, the scar of elevated unemployment might never fully fade.
While some causes of job loss were temporary, others will prove permanent, economists say.
“There have been structural shocks as well as cyclical shocks,” said Ethan Harris, an economist at Bank of America Merrill Lynch. “There are industries that probably won’t come back for a long time.” More