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Posted on Thu, Nov 19, 2009 : 9:35 a.m.

U.S. unemployment will top 9% through 2011, University of Michigan economists say

By Nathan Bomey

U.S. unemployment will peak at 10.4 percent in early 2010 and dip slightly to 9.5 percent by the end of 2011, according to a University of Michigan economic forecast released this morning.

The economy will expand by 2.3 percent in 2010 and 2.6 percent in 2011, but job growth will be slow to follow, economists said today at the 57th annual Economic Outlook Conference at the Rackham School of Graduate Studies.

U-M economist Joan Crary said the national unemployment rate would remain "high for quite some time."

The forecast comes as Michigan officials said Wednesday that the state's unemployment rate had dipped slightly to 15.1 percent in October. U-M economists will release their Michigan economic forecast Friday morning.

The national unemployment rate increased from 9.8 percent in September to 10.2 percent in October.

The national unemployment rate will average 10.4 percent in the first quarter of 2010. Since World War 2, the only time the unemployment rate has been that high was the fourth quarter of 1982.

The economy, which lost 5 million jobs in 2009, will add 600,000 in 2010 and 2.5 million in 2011, according to the U-M forecast.

History “seems to suggest that sharper downturns are followed by more rapid growth and milder downturns are followed by less vigorous growth,” Crary said. However, the economic recovery will be tapered by a still-recovering financial system, weak consumer spending, the housing market’s contraction and other global factors, according to the forecast.

“Consumer spending is restrained. Plummeting home prices and pension values left household balance sheets in need of repair,” Crary said. “Consumers have been paying down debt, but even when debt is back to manageable levels, home equity won’t provide the support to consumption that it had in recent years.”

The U-M forecast indicates that spending and tax cuts associated with the federal government’s $787 billion stimulus package would peak during the fourth quarter of 2009.

But “the contribution of the stimulus to the rate of growth ... will diminish in the future,” Crary said.

However, economists credited the federal government's aggressive economic actions for helping the U.S. economy avoid a disaster.

"The federal government's series of unprecedented policy actions - both fiscal and monetary - deserve much of the credit for this dramatic shift from an economy that nearly went into free fall to one that is at least clawing its way back up," Crary said.

U-M economists project a slight recovery in light vehicle sales that could encourage the major automakers.

Vehicle sales tanked to 10.2 million in 2009, but will recover to 11.2 million in 2010 and 12.1 million in 2011, according to the forecast.

In the housing market, a rapid recovery is unlikely, although the housing market appears to have bottomed out.

U-M economists project that sales of existing homes would increase from 4.46 million in 2009 to 4.94 million in 2010 and 5.2 million in 2011. At the peak of the housing market in 2006, sales of existing homes reached 6.2 million.

“The housing market still needs repair. Some stability seems to be developing in parts of the housing market and new home inventories are approaching more normal levels,” Crary said. “However, the backlog of unsold existing homes, including those held off the market, will keep some downward pressure on new construction.”

The price of oil, currently about $80 a barrel, will still be $80 by the end of 2010 and $86 by 2011, according to the forecast. Oil prices briefly topped $140 a barrel in 2008 before plummeting below $40 earlier this year.

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter.



Thu, Nov 19, 2009 : 12:09 p.m.

What about all the jobs the stimulus packages created? Aren't those billions flooding the states help reduce unemployment?

John Galt

Thu, Nov 19, 2009 : 11:43 a.m.

I think the unemployment rate will remain above 10 percent through 2011. Today we got the news that more than 14 percent of all homeowners with a mortgage are either in foreclosure OR behind in payments. Last week the USDA announced the latest food stamp numbers (August 2009): 36,491,920 Americans on food stamps (1 out of every 8 people) We may not use food lines, as in the depression. But if we didn't have food stamps you would see massive lines at the kitchens. Now, it is merely hidden (great for the politicians) Our country is broke. The government is broke. Businesses are dropping like flies (Simmons mattress company announced BK this week. Aetna is lay-off 1000, etc.) All the "news" spins the facts to downplay the true extent of the problem.


Thu, Nov 19, 2009 : 10:58 a.m.

Well Nathan it will be no better or even worse. Stop kidding yourself.

Nathan Bomey

Thu, Nov 19, 2009 : 10:04 a.m.

Eric64, thanks for the comment. This forecast discusses the U.S. economy, not the Michigan economy. U-M's Michigan economic forecast will be released tomorrow morning. Watch for that.


Thu, Nov 19, 2009 : 9:59 a.m.

Gee what a shock this is we all know this already. Above nine percent.Try over 15% like it is now.