US in slow recovery but jobless rate to remain high - OECD

20 September 2010 19:27  [Source: ICIS news]

WASHINGTON (ICIS)--The US economy is slowly recovering from a severe recession and should see gross domestic production (GDP) expansion of 2.6% in 2011, a major international study said on Monday, but that modest growth will not reduce unemployment significantly or soon.

In its 2010 survey of the US economy, the Organisation for Economic Co-operation and Development (OECD) said that while the US is in recovery from the 18-month recession that ended officially in June 2009, the nation’s “economic growth is projected to remain low for some time [and] unemployment is likely to stay elevated for a relatively long period”.

The OECD was formed in the wake of World War II to advance democracy and market growth among nations with co-operation, analysis and policy research. Its 33 member nations are chiefly the industrialised countries of Europe, North America and Asia, but also include Chile in South America and Israel in the Middle East.

OECD Secretary-General Angel Gurria noted that while the US was in recovery, improvements in various sectors of the nation’s economy were neither strong nor consistent, and some had weakened.

“It is becoming increasingly clear that the [US] economy has entered a soft patch, but this is not inconsistent with previous recoveries,” Gurria said in announcing the OECD 2010 US economic survey.

“We don’t see a risk of a double-dip recession,” Gurria said.

“That said, we don’t see a recovery that is strong enough to put a significant dent in unemployment," he added.

The US Commerce Department recently revised downward the nation’s second-quarter growth rate in GDP, lowering the pace of expansion for the quarter to 1.6% from the initial estimate of 2.4%.

The OECD analysis said that “US employment has started to rise, although the unemployment rate is likely to stay above the pre-crisis level for an extended period and long-term unemployment remains a concern.”

In its analysis, the OECD said it expected the US unemployment rate would be 9.7% for the full-year 2010 before declining marginally to 9% for 2011.

The US Department of Labor (DOL) reported earlier this month that the nation’s unemployment rate rose in August, edging up to 9.6% from the 9.5% jobless rate that had held steady in June and July after declining from the 10.1% peak seen in October 2009.

The OECD analysis forecast that US employment would not return to pre-recession levels until 2013 at the earliest.

The analysis also warned that a US return to pre-recession levels of employment might take considerably longer.

“The current high level of long-term unemployment - 4.25% of the labour force has been unemployed more than half a year - is a particular concern,” said OECD analysts.

“The risk is that part of this upsurge in unemployment may not be fully absorbed during the ensuing recovery, resulting in a permanently higher level of unemployment,” the study said.

The outlook also expressed concern about the increasing US budget deficit and much higher levels of the national debt, trends that have rung alarm bells at the US Federal Reserve Board.

“Fiscal consolidation measures need to be implemented to substantially reduce the deficit and eventually reverse the rise in public debt,” the OECD said.

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