The unemployment rate will remain above 6.5 percent throughout 2014 and into 2015, according to two economists from the Cleveland Federal Reserve, whose forecast is more pessimistic than the central bank’s official projection that the rate would drop to that level by the middle of next year.
The paper, published Wednesday by Edward Knotek and Saeed Zaman, predicts when unemployment will hit the 6.5 percent threshold set by the central bank as an indicator that the economic recovery is strong enough to modify Fed policy. “Based on our model, the single most likely scenario is for the unemployment rate to cross its threshold by the third quarter of 2015,” the economists write.
The report tosses some cold water on optimism about job growth. Friday’s monthly jobs report came in above projections, with 203,000 jobs added in November rather than the 185,000 economists expected, but there was only marginally above average monthly job growth for the past year. Knotek and Zaman’s work suggests that the November report isn’t a sign of some sort of rapid take-off in the rate of job growth. The Cleveland Fed researchers are not alone in that view. As economist Justin Wolfers noted Friday, the new official jobs data was strong but not a dramatic departure from the trend of the past few years:
Despite the evidence that unemployment will remain quite high throughout the coming calendar year, Congressional Republicans are threatening that they won’t extend emergency unemployment benefits — the federal program that backstops state-level jobless insurance for the long-term unemployed — and leave over a million job-seekers without assistance. The long-term unemployed make up 37.3 percent of all unemployed people in Friday’s jobs report.
That is terrible news for people like Lillian Humphrey, a 62-year-old whose health problems forced her to leave her job at the start of 2013. She depends on emergency unemployment benefits to pay her bills and keep her house while she tries to find new work at an age where many employers are not willing to give her a position. Humphrey is one of over 2 million people who will likely drop into abject poverty over the coming year if emergency benefits are not extended.