Managing Editor
IBM Corp.’s chief economist predicts it will be 2013 to 2015 before unemployment, now around 10 percent, falls by half to what’s considered a healthy rate.
“My guess is it would be three to five years before we see unemployment getting back to 5 percent,” said Philip Swan, who has been with IBM for 36 years.
Job creation is the key to economic recovery, he said, because it influences consumer confidence.
That confidence has eroded since the recession began in December 2007 and has yet to be declared officially over.
Swan, speaking to a Jacksonville Community Council Inc. meeting at lunch Wednesday, provided some numbers for that.
In December 2007, unemployment was 5 percent and underemployment was 4 percent, totaling 9 percent.
Underemployment is the situation in which workers might be working part-time or less and want full-time or other more secure hours.
Now, national unemployment is 9.5 percent and underemployment is 7 percent, which totals 16.5 percent.
“We have never seen anything that dire,” he said.
Looking at the numbers of people affected, Swan said there are 7.4 million people unemployed and 5.6 million underemployed, leading to 13 million people who want secure employment.
Swan said the economy needed to generate 120,000 jobs a month merely to absorb new people entering the labor force. To start whittling down the unemployment rate, that growth needs to be 250,000 jobs monthly, he said.
Swan thinks the economy could reach that pace in five to six months.
Swan’s presentation was called “Recession & Recovery - A Fortune 100 View.” He also was scheduled to speak to the Jacksonville Regional Chamber of Commerce Trustees Wednesday afternoon.
JCCI’s meeting was open to the public and drew about two dozen participants. The chamber event was by invitation only.
Swan agreed with other economists who say the recession ended in mid-2009, when
gross domestic product began to grow.
He called the economic downturn “the deepest recession since the Depression.”
Swan outlined the series of events that led to the recession and recovery, such as the financial “seize-up,” stock market collapse, housing bubble burst, employment plunge, government stimulus, global demand for U.S. exports, U.S. corporate investment in equipment to improve productivity and other factors.
He said that in the rest of the world, “we’re seeing some recovery, but no sizzle.”
Acknowledging deflationary pressures as inflation remains flat or less, Swan predicts the economy will grow by 2.7 percent this year. “We’ve got a lot of potential to grow the economy,” he said.
Swan said companies had money to spend, but are reluctant to hire employees, instead relying on existing workers to do more work.
“We need to get beyond that and see jobs created,” he said.
He showed a chart of global economic growth, which illustrated the decline from the fourth quarter of 2008 through the third quarter of 2009. “We think the recession ended last summer,” he said.
Calling it a “plain vanilla type of recovery,” Swan also outlined the economic risks: Global debt issues, private debt deleveraging, protectionist pressures, energy prices and deflation.
He said the housing market recovery was slower than average, and “we still don’t know what happens with commercial real estate.”
Swan doesn’t think that commercial real estate will reach the extreme of the housing collapse because commercial loans weren’t what he called the “ninja mortgages” of the residential variety – the “no income, no job, no assets” loans.
Swan was one of several speakers planned in coming weeks to position JCCI’s next study, its 71st, “Recovery, Recession and Beyond: Job Creation, Employment and Improving Northeast Florida’s Competitiveness.”
JCCI Executive Director Skip Cramer said Wednesday that the study committee, open to anyone interested, will start Oct. 20 and will meet noon-1:30 p.m. each Wednesday.
The first meeting is scheduled at JCCI offices along Atlantic Boulevard near San Marco. After that, the committee will hold fact-finding meetings in each of the seven counties of Northeast Florida, consisting of Baker, Clay, Duval, Flagler, Nassau, Putnam and St. Johns counties.
The meetings will return to one spot in January, the Northeast Florida Regional Council in the Southpoint area, and conclude at the end of April or early May, he said.
Former City Council member Elaine Brown will chair the study. She is incoming president of the regional council.
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