Friday, March 19, 2010

Tennessee's unemployment rate won't get much relief from jobs bill

A jobs package signed into law on Thursday is not expected to create enough jobs to improve Tennessee's persistently high unemployment rate.
"It will have almost zero impact," said David Penn, associate professor of economics at Middle Tennessee State University and director of the Business and Economic Research Center there.

A few companies may find the tax breaks enough of a motivator, but the vast majority of businesses are waiting for demand to come back before they start hiring again, Penn said.

Tennessee's unemployment rate in February came in at 10.7 percent, the same rate for the third consecutive month, the state Department of Labor and Workforce Development said Thursday.

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The fact the rate hasn't spiked upward is good news, but even more encouraging is that employment has grown for several months in a row, said economist William Fox, director of the Center for Business and Economic Research at the University of Tennessee.

"I think the signals are clearly that the labor market has stabilized," Fox said.

Two major state employment surveys show net gains in employment, a positive sign although significant hiring has yet to occur, said Labor Commissioner James Neeley.

President Barack Obama's $38 billion jobs package contains $18 billion in tax breaks and $20 billion in highway and transit spending, a modest mix designed to encourage the private sector to start hiring again.

The tax breaks could generate 250,000 jobs by year's end, according to the most optimistic estimates, a tiny portion of the 8.4 million jobs the economy has shed since the recession began in December 2007.

"It will have a small impact on the cost of hiring employees," Fox said. "Employers will not expand only because of the tax credit. Ultimately, they will need to see demand for their products to justify new workers."

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