UN Questions Whether US Jobless Rate Can Fall Further
Friday's U.S. non-farm payrolls showed a surprise fall to a 4-year low of 7.7 percent as the U.S. economy added 146,000 jobs in November.
According to Guy Ryder, the Director General of the International Labor Organization (ILO), the U.S. unemployment rate "can stay below 8 percent, but the big question is whether it can fall further." Ryder, who has been the DG of the Geneva-based UN agency since October 2012, says it will be a "big job to get to the 4.5 percent level that was current before the crisis hit."
In order to reach that level, Ryder tells CNBC that more than 10 million jobs will have to be found, with 3 million jobs still lost from the crisis and 7 million for people who are entering the workforce. Another 3 million may have to be added for those who have simply withdrawn from the workforce.
Aside from the stellar November jobs report - which according to the U.S. Bureau of Labor Statistics was barely impacted by Hurricane Sandy - the U.S. jobs market got another boost of confidence this week.
Apple CEO Tim Cook said the tech giant is planning to relocate manufacturing of some Mac computers back to the U.S. in 2013 a small reversal as most of its widely successful iphone, ipads and Macs are currently built overseas.
Asked whether this announcement by Apple ushers in a wider trend, the ILO's Ryder remains cautious: "We have all followed that trend with real fascination, but my own view is: we shouldn't believe that this heralds the return in mass volumes of manufacturing jobs to the U.S., but clearly, there are areas where manufacturing jobs can expand and adapt."
Discussing how relocation of production will affect other parts of the world, Ryder said: "Mexico is now appearing as a more competitive exporter to the U.S. than China, partly because of relative wage levels." The proximity to the U.S. market and high energy and transport costs also play a big role."
While the U.S. unemployment rate continues to fall, euro zone jobless data reached another record high of 11.7 percent last week.
Ryder told CNBC that despite the waves of structural reforms taken by hard-hit countries like Spain and Greece, the unemployment rate is unlikely to decline soon.
"I don't think the current policy mix is going to work. The problem is - we are seeing a very severe approach on austerity, mixed with very tough labor reforms. If you change hiring and firing rules in a time of global and European contraction, you will see quite a lot of firing, not very much hiring," Ryder said.
With youth unemployment at 50 percent in Spain and Greece, Ryder warned that unless more effective measures are taken to employ the young, "the often quoted phrase of a lost generation will not be a cliche anymore."