Could Rising Unemployment Help Jobs Market in the Long Run?

CNBC is reporting results from a recent poll of economists who say that unemployment will likely move higher, possibly to 10.5%, before the job market improves. The unemployment rate recently hit an over 25 year high of 10.2%. The highest recorded number since the late 1940s is 10.8%.

In addition to the obvious negative implications of such predictions coming true, there could be a positive longer term impact as well. Some observers believed that there was an outside shot that the Fed could increase interest rates after the turn of the year. However, if jobs numbers do not improve between now and then, and because any recent recovery can be linked directly to government, rather than corporate, spending, it is unlikely that interest rates will be changed any time soon.

Because low interest rates result directly in lower demand for the dollar and dollar-denominated investments, the implications of high unemployment have recently flowed over into other areas, such as commodities markets. That has been obvious the past few days as gold has topped $1100 an ounce with investors flocking to perceived safety. What is perhaps less obvious is that high unemployment now could be good for the recovery of the economy. This is because a low dollar is good for exports, and therefore profits. Higher corporate profits lead to spending, which in turn leads to job creation. Therefore, though it may not feel this way right now, in a roundabout way, it is possible that today's jobs pain could help lead to tomorrow's jobs recovery.