Only 13.5 years until unemployment is back to 5%, according to the WSJ article of 7-16-11. I have been writing about this for some time that the labor market is crippled and it will take as long as the Great Depression of 1929-41 to heal.
The number of factory jobs decreased by five million in the past decade and the number of mortgage and real estate bubble jobs permanently lost has been one million. It will take years for these people to realize they need a new career, get the training and then find an entry level job and then acquire the journeyman skills to justify getting a real paycheck.
This reminds me of articles saying that the real estate market won’t recover for 28 years in some depressed areas.
What this all meansWhat this means is that low inflation and low interest rates may last for the rest of this decade. High unemployment is the number one factor in making inflation and interest rates low. This is why the bond market vigilantes are not energized by the recent price increases in vegetables and oil.
The Federal budget deficit is primarily caused by the failure of Congress over the past thirty years to calculate and plan for the cost of increasing lifespans of Social Security and Medicare beneficiaries. So “means testing” will be legislated (it already has) and that means people under age 70 to 75 may have to pay a lot more to Medicare and receive a lot less of Social Security. So these people will need to stay in the labor force to pay for retirement, which means the jobless rate will be influenced by an even greater supply of job seekers. These extra job seekers will be upper-middle class people who will have to bear a disproportionate burden of “means testing” due to income, so they will stay in the labor force and use their superior job skills to compete with others, thus making it harder to solve the unemployment problem.