The former Fed chief says 'frightened' businesses cut payrolls so deeply they will have to begin hiring soon as production expands
By Mike Dorning
(Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said today he expects a quick rebound in jobs because companies are stretched to expand production after workforce cuts made during the recession. Greenspan said on NBC's (GE) Meet the Press program that businesses were "very frightened" by the financial crisis and deterioration of the U.S. economy early this year and cut their payrolls so deeply that they will have to begin hiring soon.
"We have a level of employment at this stage which is barely adequate to staff the level of output," Greenspan said. "It seems to me virtually inevitable—if nothing else were to happen—that employment would start to come back fairly quickly."
Greenspan said that even as companies begin adding workers the unemployment rate may continue to rise because the economy needs to add 100,000 jobs per month simply to keep even with population growth.
Many workers who lost jobs during the recession and later gave up looking for work are likely to return to seeking jobs, he added. They would then be counted in unemployment statistics, which exclude people not actively searching for work.
"That will make the hurdle as to bringing unemployment down quite difficult," Greenspan said.
The unemployment rate in November dropped to 10 percent from 10.2 percent the previous month, when it reached the highest in 26 years. Non-farm payrolls dropped by 11,000 in November.
Greenspan said the number of workers who have remained jobless for long periods during the recession is "what really concerns me."
In November, 5.9 million U.S. workers had been jobless for 27 weeks or more, the most recorded since 1948. The long-term jobless now make up 38 percent of the unemployed population.
"These people are losing their skills," Greenspan said. "It is very critical that those people have the skills when the economy comes back or we will not be as productive as we ought to be."
Greenspan said the country is experiencing a divide between "two economies," one for large businesses and wealthy individuals and the other for small businesses, small banks and the unemployed.
"I'm very concerned about where the job machine is relative to small businesses, which are doing miserably," Greenspan said. "They're having great difficulty financing and great difficulty creating jobs."