IHL: Unemployment slowing economic recovery
Published: December 21,2010
JACKSON — The Jan. 2011 issue of the “Mississippi Economic Review and Outlook,” published by the Center for Policy Research and Planning of the Institutions of Higher Learning (IHL), is now available online at www.mississippi.edu/URC.
This issue presents the state economic forecast for 2011 to 2015, and includes detailed employment forecasts by sector. Regional, national and international developments impacting the state economy are examined.
“Fiscal austerity and high unemployment rates continue to slow the pace of recovery,” said senior economist Dr. Marianne Hill. “However, several economic indicators confirm that the economy is gradually gaining steam.”
Retail sales have been rising, many sectors are adding jobs and tax revenues are running at the levels estimated for the current fiscal year. Still, the unemployment rate is hovering near 10 percent, and a funding shortage has brought cuts in several state programs. A return to 2007 levels of employment is not expected before 2015.
Employment dropped more in construction than in any other sector, sinking 10 percent in the first three quarters of 2010 in comparison to the same period in 2009. Half of the 10 major sectors, however, are adding jobs, according to the most recent data available. Housing starts were down in the third quarter, compared to the previous year; an upturn awaits the national recovery.
On the national level, the fledgling economic recovery hit a rough patch mid-year, and while growth continues to be positive, the rate of increase in gross national product is expected to be lower in 2011 than in 2010. The good news related to job creation is that the private sector has been adding jobs since the first quarter of 2010, more than offsetting a drop in government employment. The bad news is that the number of persons unemployed remains high and the labor force continues to grow; the unemployment rate is not expected to drop below 9.0 percent until 2012.
The strongest driver of the recovery on the demand side has been private investment, which grew at a double-digit rate during the first three-quarters of 2010. More recently, weakness in construction spending has offset continued growth of spending on equipment and software.
The financial system remains the Achilles’ heel of the recovery.
“Toxic assets remain on bank balance sheets; government debt in countries around the world threatens the value of several currencies, and financial reforms do not appear to have rooted out the weaknesses that led to the unsustainable speculative bubbles causing the crash,” said Hill.
Bob Neal provides an overview of regional trends in his article on employment and earnings in Mississippi and the Southeast during the Great Recession. The Mississippi economy lost approximately 73,000 jobs or about 6.3 percent of employment from Q4 of 2007 through Q3 of 2010.
“This job loss was slightly lower than the average for all southeastern states, but greater than the national average,” said Neal. The percentage drop in earnings was slightly less than that in jobs, which indicates that “the pain associated with the recession was felt predominantly by those on the lower rungs of the economic ladder,” according to Neal.
Basic data on the state budget and on how Mississippi ranks in comparison to other states are presented in this article by Hill. Hill argues for performance-based budgeting and an updating of the tax system to address revenue shortfalls that are expected to continue even after the recession ends.
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