Asia-Pacific News

Jobless Rate Actually Stands at 11.5%: Roach

The true unemployment rate in the United States is actually higher than we think -- at 11.5 percent, said Stephen Roach, Asia chairman of Morgan Stanley.


"The (official) unemployment rate at 9.7 percent is distorted downwards by at least 3 million people who have simply given up looking for work and who have effectively taken themselves out of the work force for economic reasons," Roach said on CNBC.

"For some bizarre reason, the U.S. statisticians do not count these poor souls as unemployed. If you add them back in, the unemployment rate isn't 9.7 percent. It's 11.5 percent," he said.

U.S. employers cut a smaller than expected 36,000 jobs in February, leaving the unemployment rate steady at 9.7 percent. The data sent global markets higher on hopes the labor market was on the brink of creating jobs.

Roach: US Jobless Rate Actually Stands at 11.5%

Roach, however, cautioned that hiring may not come that quickly as businesses are still nervous about demand prospects.

"The idea that we can get some spontaneous revival in employment and capex when the consumer is under serious trouble, to me, is really missing a key analytical point to take away from this tough post-crisis climate."

There is a lot of slack still in the U.S. labor market which puts enormous pressure and uncertainty and fear into American consumers, Roach said.

"The American consumer is in serious trouble given the unemployment, the debt, the low savings, and the lack of income growth," he added, highlighting that the consumer makes up 71 percent of GDP.

"That's a key reason to look for a double-dip," he said, reiterating his view of a 40 percent chance of a double-dip in the next couple of years.

"The demand side is going to be very impaired by the U.S. consumer and there's no other consumer that is going to fill the void," Roach continued.

While China and India make up nearly 40 percent of the world's population, Roach noted that the two countries will not be able to pick-up the slack in U.S. demand collectively, as their consumption adds up to $2.5 trillion, which is equivalent to 25 percent of total demand in the United States.

"I think it reflects the extraordinary amount of stimulus that was injected into the equation in the depths of a crisis. And congratulations to policymakers -- they've put a bottom on the crisis in the global economy, but again."