First on CNN: Next spring the economy will sink into a 1990-style recession, Fitch says. (Hint: It’s not the economy.) In particular, we’ll see double-digit unemployment: up to 15 percent by year end, Fitch says. That would be more like 1929 and more like the Great Depression.
But we ought to see a significant decline in real median incomes by the end of this year (when jobs are created at least 50,000). That’s the key measure for how much our economy has changed since the end of the last recession.
It’s “a bit of a fluke” that the U.S. is still growing. Fitch’s outlook looks like “a late-cycle correction,” so “most people in the United States face a difficult stretch ahead.”
In this new economic reality, a worker who got a new job in January would be better off keeping his job. There’s “an ever-increasing number of workers facing a difficult time finding jobs.”
And the unemployment rate is likely to hit 8 percent in two or three years. At that point “unemployment will be above 8 percent and the participation rate will drop to 65 percent.”
But even at 8 percent “the United States is still poised to have a very high level of employment.”
The government needs to take a more active role in helping the unemployed and underemployed, Fitch says. The government and the private sector have to come together to make sure each person has a job.
But private businesses are “still not doing very well in terms of hiring and firing.” There’s a “lack of confidence in the private market.” The government will have to step in with a $5,000 “grant” for those underemployed or unemployed who have few options in terms of getting a job.