The unemployment rate in the U.S. will probably fail to drop below 9 percent in 2011, said Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., and Ethan Harris, head of developed-markets economic research at Bank of America Merrill Lynch.
Hatzius said the U.S. will need to grow 4 percent or more for the job market to improve significantly. He predicted 9 percent unemployment at the end of 2011, while Harris forecast 9.3 percent.
“We would all agree that we’re a very long way away from recovery in the U.S. job market,” Harris said on Bloomberg Television’s “Surveillance Midday” with Tom Keene, taped last week for broadcast today. “It’s going to be a multiyear process.”
U.S. job seekers had a difficult time finding work in 2010, a year that started with unemployment at 10 percent. In November, the jobless rate rose to 9.8 percent from 9.6 percent as employers created just 39,000 new jobs.
Unemployment in December fell to 9.7 percent, while payrolls increased by about 140,000, according to the median forecast in a Bloomberg survey before the Jan. 7 report from the Labor Department.
Hatzius, appearing on the same Bloomberg TV program, said the housing market is likely to stabilize in 2011, while home prices will decline 5 percent over the course of the year. He said he has lowered his expectations for housing, while becoming “a little more optimistic” about the overall prospects for U.S. growth.
Housing starts and sales of new homes may show some growth in the coming year, Hatzius said. Still, the housing market is going to require a stronger overall recovery to clear out a backlog of homes that remain unsold or mired in foreclosure, he said.
“I don’t think that policy’s really going to make a huge difference,” Hatzius said. “It’s going to require time and we’re going to have to unwind the excess supply -- that just takes real time and it’s not really something you can fix.”
Cash-strapped state and local governments are likely to be a drag on the economy in 2011, he said.
“We think it subtracts something like half a percentage point from GDP growth,” he said. “Even with that, I think the economy accelerates. We see 4 percent growth in sort of early to mid 2011.”
Obama administration efforts to encourage business investment are likely to stem declines rather than jump-start expansion, Harris said.
“It’s an attempt to kind of prevent a worse outcome more than actually cure the economy,” Harris said. “Business investment requires business confidence. That’s not happening now.”
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