Goldman Sachs Forecasts Average Unemployment Rate of 10% in 2011
Early Friday morning, the Bureau of Labor Statistics (BLS) announced that the national unemployment rate had held steady at 9.5% for the month of July.
Even though many analysts and economists were expecting an uptick to 9.6%, the July jobs report continued to reinforce the view that the country may be heading towards a double dip recession.
Total nonfarm payroll jobs fell by 131k in July, missing the consensus estimate of -64k by nearly 70,000 jobs. In addition, private sector payroll employment "edged up" by just 71,000 (consensus estimate was 90,000).
More bad news - total nonfarm payroll employment was revised lower from -125,000 to -221,000 for the month of June.
Sure, the national unemployment rate managed to hold steady at 9.5% in July, but the underlying news was not good.
Goldman Sachs further added to the gloom by lowering their GDP and unemployment forecasts for 2011.
Goldman Sachs now expects economic growth of just 1.9% in 2011 (down from a previous estimate of 2.5%), as well as an average unemployment rate of 10.0%.
Let's make it clear - Goldman Sachs is not expecting that the unemployment rate will simply peak at 10% and then head lower in 2011. Instead, they are expecting that the average national unemployment rate for all of 2011 will be an average of 10.0%.
Here is a breakdown of their estimates for the unemployment rate by quarter in 2011:
Q1 - 9.9%
Q2 - 10.0%
Q3 - 10.0%
Q4 - 10.0%
Compare this to their previous estimates:
Q1 - 9.9%
Q2 - 9.9%
Q3 - 9.8%
Q4 - 9.7%
It's no wonder that Goldman Sachs is expecting GDP growth of just 1.9% in 2011.
Prior to the "Great Recession", the last time that the country had to deal with 10% unemployment was in 1982. The country was going through a period of tremendous economic turmoil that was caused by stagflation (high inflation coupled with weak economic activity). The national unemployment rate hit a high of 10.8% in November and December of 1982.
In October of 2009, the United States posted a national unemployment rate of 10.2%. This is the highest monthly average since the "Great Recession" started in December of 2007.
So, according to Goldman Sachs, the national unemployment rate will only decline by 0.2% from October 2009 to December 2011 (26 months).
In contrast, by February of 1985 (26 months after unemployment hit a peak of 10.8% in December of 1982), the national unemployment rate had dropped to 7.2%.
The next couple of years are going to be some of the most interesting in the history of the nation.. will the country sail through these very troubled waters and regain its footing, or will the US continue to come apart at the seams?
Source: Zero Hedge - Goldman Capitulates: Lowers GDP Forecast, Increases Unemployment and Inflation Outlook, Sees Imminent QE "Lite"
Source: Davemanuel.com - Historical Unemployment Rates United States
Filed under: The Economic Meltdown
1 COMMENT - What Say You?
Comment by Southern Son on May 23, 2011 @ 12:44 pm
I find it rather interesting that after all of the information that has come out AFTER the fact concerning our economic challenges that no one person has had the forwardness to state that , for the large part , our hits and losses have come by way of the current situation due to our own degrees of greed and under the table class politic based system of doing things . We failed to reinforce our base of foundation as to be able to absorb our losses evenly across the board . The unemployment problem is much more than just about the jobless and its' duration underscores the fact that there are still changes yet to be made and accepted if America is to ever regain a strong sense of moral and financial identity about itself . We ( Americans ) must work to get our house in order if we are to do more than just survive at this point . We are not at the crest of the problem , itself ; we are deep within it and regardless of the claims that are being made , we have some work to do if we are to reclaim our footing and move ahead .
The citizens of the United States deserve more than just rhetoric and empty stats . We have to protect our interests here and that means a stable job market that can sustain jobs for most of the population ; Technical , Trade , and intermediate skill . Companies that employ illegal labor should be dealt with harshly by the authorities because their actions are impacting American citizens and , to a larger degree , the American labor market . Illegal Laborors that have entered the country illegally should be deported . The desire for a better life is admirable , but while you are considering to yourself that all people should have the right to pursue a better life , please keep in mind that it is the right of people here within this country to do so as well and to allow the balance of access to be shifted from one to the other based upon greed and politics is unethical and wrong . Illegal labor is , by its ' very designation ILLEGAL .
We can still move past all of this , but the choice of throwing away the hard earned lessons that we have been forced to accept is not an option .
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