The Herman Trend Alert|
September 24, 2003
Unemployment Rate May Rise during Employment Turbulence
The economy is improving. Will this be a jobless recovery--or will thousands of new jobs will be created? We anticipate a job-filled recovery--eventually. Looking at the factors one way, we see a rapid rise in employment. Looking at the same factors another way, we see a gradual rise. Today's conditions are unprecedented, so it is difficult to be as specific in our forecasts as we would like to be.
We do not see a jobless recovery. Why? There are already thousands of jobs unfilled. The challenge facing employers is attracting applications and resumes from people whose qualifications fit the skill sets needed in the jobs that are open. Most employers we talk with are frustrated with the difficulty of finding qualified applicants.
Our unemployment rate is calculated on the basis of people who are unemployed and actively looking for new jobs. When frustrated workers can't find the jobs they want and give up, they are no longer counted. They are now described as the "discouraged unemployed"---a large number of people that does not show up in the government reports.
As jobs become available through economic growth, people who had been discouraged---and had given up looking---will see opportunities. With a renewed hope and anticipation of becoming fully employed again, these people will begin looking in earnest for new jobs. Now, actively seeking work, they will be counted again---causing the unemployment rate to rise. Just when most people will expect the unemployment rate to drop, it may increase. Rising unemployment could be a positive sign.
Hundreds of thousands of people are out of work. Many workers may not be qualified for the jobs that will be available. They used to be competent, but technologies, job requirements, and employer needs and expectations have changed. As a result, a lot of people are well-qualified for jobs that no longer exist. In a word, they are obsolete. To prepare for the more attractive opportunities, many workers must be retrained and re-educated--at their expense (a head start on early job openings) or at the expense of the companies that hire them.
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