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Unemployment
rates are expected to remain high across the nation
this year despite recent signs that the economy is
growing faster than expected.
Eight
states, the District of Columbia, and Puerto Rico
had unemployment rates of 6 percent or higher in January
2002. Puerto Rico, Oregon and Washington State reported
the highest rates at 11.1, 8 and 7.5 percent respectively.
(Map at right compares unemployment rates in January
2002.)
According
to a recent WAI review of economic forecasters, the
most optimistic forecasts have national unemployment
peaking at 5.7 percent in the first half of the year
and falling to 5.4 percent by year’s end. Other
forecasters see unemployment rising as high as 5.9
percent this year. None of the forecasts predicts
that unemployment will fall below 5 percent until
the second half of 2003 at the earliest.
In March, six months after the terrorist attacks,
Congress passed an economic stimulus package that
extended unemployment benefits an additional 13 weeks
and provided new financial assistance to New York
City.
The
stimulus package, however, offered little help to
states facing huge budget shortfalls caused by lowered
tax revenues and dramatic increases in health care
costs. Forty-one states face budget deficits totaling
more than $40 billion, according to the National Association
of State Budget Officers.
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Does
economic growth mean more jobs and less unemployment?
Not
necessarily. The economy needs to grow by at
least 3 percent a year before the unemployment
rate will decline. The reason: increased productivity
(about 2 percent a year) and population growth
(about 1 percent a year) will mean that there
will be fewer jobs, or that jobs won’t
grow fast enough to absorb all the new job-seekers,
unless economic growth increases by 3 percent
to offset these forces
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A
‘Manufacturing Recession’
Although
few economic sectors were spared the impact
of the recession and the terrorist attacks,
manufacturing was hit the hardest.
The
AFL-CIO reported that more than a third of
all announced layoffs since the September
11 attacks took place in the manufacturing
sector (see “U.S.
Layoffs by Sector”).
In
addition, from March 2001, when the recession
began, through February 2002, the U.S. Bureau
of Labor Statistics reported that of the 1.4
million jobs the economy lost, 1.2 million
were in manufacturing.
This
means that about six out of every seven jobs
that were lost since the beginning of the
recession were manufacturing jobs. In terms
of job losses, this recession has largely
been a “manufacturing recession.”
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