The chief economist with South Texas Money Management says businesses are waiting for more clarity on policy changes before hiring again. Jim Kee says in the last two recessions, unemployment continued to rise for 16 to 20 months after the economy began growing again. He says this pattern is likely to be repeated.
“You have to get businesses off of the fence. I mean, there’s a lot of uncertainty out there, as far as policy proposals, and that tends to put business investment spending, and frankly, business hiring, kind of in a holding pattern. They tend to take a wait-and-see attitude. So I think, you know, there was nothing in the unemployment data that made me more or less gloomy than I was. I expect it to be pretty tough on the employment front for, again, another quarter or two. That’s, I think, what we saw in the December reports.”
The unemployment rate in Texas rose to 8.3 per cent in December—up from eight per cent a month ago. Houston also registered an 8.3 per cent jobless rate, according to the Texas Workforce Commission. Kee says employers have been cutting more aggressively than in past downturns, maybe overreacting.
“I think that’s led a lot of strategists to forecast maybe an upside surprise in hiring. I’d like to, if you just step back and look broadly at the U.S. economy for, you know, maybe the last hundred years, it tends to grow within a corridor of about three per cent per year. It gets shocked from time to time, plucked down by things like oil shocks or wars, or in this case, collapse in confidence in the world financial system. Once the shock is removed, the economy pretty much resumes its upward trend on its own.”
Kee says the response by the Federal Reserve, the Treasury and the World Bank to backstop the global system in such a coordinated fashion is helping remove the shocks to the economy.