We won’t. And we shouldn’t try to.
At least, not according to Atlanta Fed president Dennis P. Lockhart.
A realistic level [of unemployment] might be above the level I saw when I joined the Fed [in March 2007, when the rate stood at 4.5 per cent]. I do believe the structural rate of unemployment has risen. Calibrating monetary stimulus to a goal of bringing unemployment fully to prerecession levels would be a mistake.
What are the structural problems?
Not surprisingly, Mr Lockhart pointed to skills: many workers (particularly those in the shrinking construction and manufacturing industries) need to retrain before becoming employed in another field.
But Mr Lockhart pointed to a second problem – one unique to this recession. Many workers would need to move to find work, and that was complicated by people being underwater on their mortgages. In fact, a precondition for a sustained economic recovery, Mr Lockhart said, is likely the continued stabilisation of the housing market.
So, permanently higher unemployment, a recovery that still risks being hindered by the housing market (as well as a banking sector that’s slow to expand credit, a weak state and local public sector, and an extremely cautious business sector), are there any bright spots?
At least one – people who have jobs are at no greater risk of being made redundant than they were before the recession began, Mr Lockhart said.
Well, that’s good. Because – with companies reluctant to hire – those of us with jobs are gonna need to hold on to them.
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