BY JORDAN MELNICK — MEDILL NEWS SERVICE
Here’s a variation on an old favorite: If an economy climbs out of recession and nobody gets a job, does it make a difference? This spin of Berkeley’s enigmatic query arises from the Fed’s recent prediction that the recession will end “before long,” but that unemployment will stay high at least through 2011.
The minutes of a Federal Open Market Committee meeting three weeks ago reveal that the Fed thought “the economic contraction was slowing” and that “business and household confidence had picked up some” resulting in “improved expectations for the future.”
“Nonetheless,” the log continues, “most of the participants saw the economy as still quite weak and vulnerable to further adverse shocks.”
Hardly a beach-weather forecast. Which is a shame since, with the Fed predicting unemployment to reach as high as 10.1 percent in the fourth quarter of 2009 and stay well above 8 percent through 2011, it appears plenty of Americans will have unwanted—and unpaid—free time on their hands for a while.
Still, The U.S. Department of Labor reported that initial jobless claims fell last week by 47,000 to 522,000, while continuing claims fell 642,000 to 6.27 million. This would seemingly be an early contradiction of the Fed’s gloomy unemployment forecast, but not so fast. Auto companies usually make layoffs in July to retool their plants to build new models, but this year the firings came in May and June, according to MarketWatch.com. This fact may have skewed the seasonally adjusted jobless comparison.
Locally, Chicago offered seeming validation of the Fed’s prediction Wednesday when Mayor Richard M. Daley laid off 400 city workers who “did not agree to cost-cutting measures before a 5 p.m. deadline,” according to the Chicago Tribune. The former employees—141 Teamsters members and 290 workers represented by the American Federation of State, County and Municipal Employees, or AFSCME—will likely take little comfort from the fact that they are far from alone.
View a summary statement of the FOMC’s meeting HERE.