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High unemployment stymies recovery

Steve Henn Aug 5, 2009
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High unemployment stymies recovery

Steve Henn Aug 5, 2009
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Kai Ryssdal: Stop me if you’ve heard this one before. That unemployment is what economists call a lagging indicator. It tells us loads about what has already happened, maybe not so much about where things might go. But the job losses this time ’round have been so steep, and the recession so long, that some economists are worried the labor market might be something of a leading indicator. So weak that it could kill any recovery before it starts. Marketplace’s Steve Henn reports.


STEVE HENN: Economist Ray Perryman hopes and believes that the worst days of this recession are behind us.

RAY Perryman: I think we are pretty close to the bottom right now. We are kinda rolling along of the bottom of the U right now.

Perryman’s not expecting the economy to quickly climb out of that ditch — in part because the job market is so bad. The unemployment rate could break 10 percent any day.

HUGH Johnson: It’s tough to make a case for a recovery when employment conditions are as tough as they are right now.

Hugh Johnson at Johnson-Illington advisors says high-unemployment — like we are seeing now — can create its own vicious cycle. When enough folks are out of work, even the gainfully employed trim their spending out of fear, foreclosures tend to creep up, banks suffer.

And businesses often decide to trim payrolls even further.

Perryman: Clearly having roughly 10 percent of the population unemployed creates a drain.

Ray Perryman.

Perryman: You’d have more spending if you had more people employed.

And more spending would give businesses the push they need to start hiring. But the question right now is will government programs like the stimulus at Cash for Clunkers, convince enough consumers to start spending again to make a difference.

Or will rising unemployment sap the economies momentum leaving us all stuck in a ditch.

In Washington, I’m Steve Henn for Marketplace.

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