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Thursday, January 24, 2002

Nancy Coleman or Tom Kiley, (202) 775-8810



Predicted Economic Recovery Will Start Too Slowly to Stem Rising Joblessness

The economic upturn that experts are predicting for the spring won’t be strong enough to stop unemployment from continuing to rise throughout the year, according to a report released today by the Economic Policy Institute.

For American workers, this means a protracted period of uncertainty and hardship as joblessness continues to climb, reaching 6.5% by the last quarter of 2002 and falling only slightly during 2003.

The new analysis of the recession’s impact, prepared by EPI Vice President Larry Mishel and Senior Economist Jared Bernstein, appears in a new EPI Briefing Paper, “ It Ain’t Over Till It’s Really Over: Slow Growth Will Lead to Rising Unemployment in 2002 and High Unemployment in 2003.”

“Many of America’s working families will be feeling the aftershocks of the recession of ’01 for years, as they struggle to regain lost ground,” said Mishel, noting that after the onset of the last two recessions it took seven years for real family income to rebound to pre-recession levels.

Mishel and Bernstein point out that as overall unemployment reaches what will be its highest level in eight years, minorities, young workers, female heads of household, and workers in certain industries will suffer the greatest job losses.

For example, the overall employment rate of 6.5% that they are forecasting for the end of the year will mean:

  • Unemployment rates of 11.3% for African Americans, 9.0% for Hispanics, 35.3% for black teenagers, and 8.6% for women heads of families (an increase since October 2000 of 3.9, 4.0, 10.9, and 3.1 percentage points, respectively).
  • In manufacturing, unemployment will reach 10.6%, an increase of 3.9 points since October of 2000.
  • The service industries, which are usually less affected by recessions than other sectors, will reach 6% unemployment.
  • Even for families not directly affected by a job loss, the rise of unemployment from 4.0% in October 2001 to 6.5% in late 2002 will lower family earnings indirectly due to slower wage growth and reduced hours. A 2.5% rise in unemployment reduces a middle class family’s earnings 4.5% from what they otherwise would have been.
  • For families in the bottom 40%, these earnings losses bite even deeper; these families will lose 9% of earnings, on average. Such disproportionately high earnings losses for the lowest income families could fuel new growth in income inequality, which had stopped growing during the prosperous, high-employment period of the late ’90s.

“The tight labor markets of the late 1990s gave low-wage workers their first persistent real wage gains in decades, but now the recession-induced increase in unemployment threatens to reverse those gains,” said Bernstein. “Policy makers should make it their top priority to return to 4% unemployment as quickly as possible.”

View the full report in HTML or printer-friendly PDF

The Economic Policy Institute is a non-partisan, non-profit economic think tank founded in 1986. The Institute is located on the web at


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