Economists say unemployment may hit 12/13 percent

Editor's Note: The following is an exceprt from the WSJ.com blog Real Time Economics.

(Economist David Rosenberg) points out that beyond those who are counted as officially unemployed, “there are the record number of people [about nine million] who got furloughed into part-time work,” plus many more who have dropped out of the labor force altogether.

Mr. Rosenberg’s call comes at a time when despite glimmers of improvement in the nation’s job market (such as a slowdown in new unemployment claims and a small uptick in job openings), unemployment continues its sharp rise. The U.S. unemployment rate hit 10.2% in October, according to the Labor Department, double the 5% rate seen just last year and the highest level since 1983.
Other economists, such as Jan Hatzius, chief economist at Goldman Sachs and Nouriel Roubini, a professor at New York University, have floated the idea that unemployment could hit or even surpass 11%, but Mr. Rosenberg is the first to predict an unemployment rate as high as 12%-13%.

“If it weren’t for the drop in the labor force participation rate… the unemployment rate would be testing the post-WWII high of 10.8% right now,” he writes. “The business sector has a vast pool of resources to draw from before they start tapping into the ranks of the unemployed.”
“Hence the unemployment rate is going to very likely be making new highs long after the recession is over — perhaps even years,” he writes. “This will undoubtedly be a major political issue.”

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