The U.S. economy faces a “long haul” to reduce unemployment as the country loses public payrolls and subdued bank lending restricts job creation, said David Blanchflower, an economics professor at Dartmouth College and a former Bank of England official.
“We’re going to see variation month by month and it’s going to be a long haul to get unemployment down,” Blanchflower said in an interview from Southampton, England, today on Bloomberg Television’s “The Pulse” with Andrea Catherwood, ahead of today’s U.S. payrolls data. “We may see something this month, quite good numbers, but the suspicion is next month things will continue to be a variable.”
The Labor Department data may show employment probably picked up in December, raising the odds the world’s largest economy will continue to strengthen in 2011. Still, Federal Reserve officials last month reiterated that progress toward cutting unemployment and preventing inflation from slowing too much remained “disappointingly slow,” according to minutes of their Dec. 14 meeting.
“I’m expecting a better figure, but I’m not sure I’m expecting a record figure,” Blanchflower said, referring to today’s release. “The worry still is private-sector job creation can’t make up for much of the public-sector job destruction that’s still going on.”
The U.S. added 150,000 jobs in December, according to the median forecast of 78 economists surveyed by Bloomberg News. The unemployment rate is forecast to have fallen to 9.7 percent in December from 9.8 percent the previous month. The Labor Department’s figures are due at 8:30 a.m. in Washington.
Blanchflower said one of the factors preventing faster job creation is a limit to workers’ mobility, citing plumbers and other tradesmen who lost jobs due to the housing slump and are unable to find work in other industries.
“There are jobs and there are vacancies, but the people aren’t in the right places,” the economist said. “There’s this big problem of the housing market, so mobility of the U.S. working population is somewhat restricted.”
He also said banks “still aren’t lending enough and that’s going to inhibit creation of jobs down the road.”
Blanchflower, who previously worked as an adviser on labor market issues to the New York Federal Reserve, the Swedish government, as well as city councils in the U.S. and the U.K, contributes to Bloomberg News as a columnist.
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