Citigroup Inc (C), Bank of America Corp (BAC): Why the Days of 6% Unemployment Are Gone Forever

Yet, in recovering markets such as California, construction jobs actually decreased in May — despite the fact that builders can’t seem to keep up with demand. In an environment where trained workers are scarce, it makes little sense to thin the ranks when a rebound appears to be in the works.

All indicators point to higher long-term unemployment
Even if homebuilders could find all the workers they want, I think it’s highly unlikely that employment in the construction field would ever again reach the lofty heights of the housing boom. Even Fannie Mae estimates that only a little more than 400,000 construction jobs will be added to the economy by 2016, bringing the total to approximately 2.5 million. Those million jobs lost after the bubble burst are gone for good.

The same is true for banking, where cost-cutting continues to feature job cuts. Add to the mix the debilitating loss of domestic manufacturing jobs — and the distressing fact that 8 out of 10 of the jobs formerly filled by those without a college degree disappeared since the crisis — and prospects for lower unemployment look dim, indeed.

The members of the Federal Open Market Committee currently hold the view that the long-term unemployment rate will stabilize somewhere between 5.2% and 6%. Considering how high the unemployment rate has stayed since the crash, I can’t see that metric ever getting below 6% again. Absent another bubble, the jobs lost after the housing crash will never be regained — particularly since many of them were unsustainable anyway, the result of a market that artificially pumped up demand.

Likewise, there seems no real mechanism for replacing most of those lost jobs since so many manufacturing jobs have also gone away. The kind of economy that supports an unemployment rate of 6% or less doesn’t appear to exist anymore, a reality that both workers and investors need to get used to.

The article Why the Days of 6% Unemployment Are Gone Forever originally appeared on and is written by Amanda Alix.

Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Bank of America Corp (NYSE:BAC). The Motley Fool owns shares of Bank of America, Citigroup Inc (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM).

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