Kansas City Fed Paper Sees Jobless Recovery

Kansas City, MO, Aug. 13, 2009--The Federal Reserve of Kansas City has painted a bleak employment picture for the next decade in a new paper posted on its website.

The research says that hiring is unlikely to rise much even if the recession ends, and warns things could be worse than now thought.

The paper describes two main forces that will likely create a jobless recovery at the end of the recession. First, there have been changes in the structure of the economy that make employers more reluctant to take on new hires. And second, recessions caused by banking crises tend to depress the rate of job growth.

The authors see unemployment higher than 10% and staying there through 2011, after which it “slowly drifts” down to 8% by 2014 and 7% by 2016. Even a decade down the road, unemployment could be above 6%, the paper warns.