Job boom could be coming soon
Economists at the University of Michigan predict that 3.5 million jobs will be created in the next two years.
NEW YORK (CNNMoney.com) -- There is no denying that the job market is weak.
The Department of Labor reported this morning that 432,000 people filed for unemployment benefits in the past week - making this the fifth straight week that jobless claims topped the 400,000 mark.
And so far this year, there has been a loss of 463,000 jobs.
Yet, some are starting to see light at the end of the tunnel on the job front. Economists at the University of Michigan said in a report released yesterday that 900,000 jobs will be added next year and that 2.6 million more will be created in 2010.
Joan Crary, an economist with the University of Michigan, said that this forecast is based on a belief that the economy will finally begin to rebound in the second half of 2009.
She added that the increase in jobs will likely be broad-based. But two particularly hard-hit sectors of the market could help lead the comeback.
"To get this sort of recovery, you'll have to have a turnaround in housing. So you'll have to see a pickup in construction jobs. We could also get a pickup in vehicle manufacturing with the shift to smaller cars," she said.
Crary added that as long as oil prices remain relatively high, she expects more companies to aggressively invest in other energy sources, such as solar power, wind power and ethanol.
"Alternative fuel could be an area where there will be a lot of research and development going forward, so we could see some job gains in that industry," she said.
Still, the job market is not likely to improve in the next few months. The University of Michigan is predicting that a total of 700,000 jobs will be lost in 2008. That implies an average loss of more than 47,000 a month for the final five months of the year.
And some think that forecast is too optimistic.
"I don't see anything rosy about what's going on in the job market. The level of unemployment claims are in recession territory," said Kurt Karl, chief U.S. economist with Swiss Re.
Karl said he expects a loss of at least 100,000 jobs in August, and that, towards the end of the year, the economy may be shedding up to 200,000 jobs a month.
But Karl also believes that the economy will bounce back next year. That, eventually, should lead to job gains.
"The economy should improve next year though. The housing market will start heading up in the second half of the year and the consumer will come back, especially if we continue to get a break on inflation with oil prices coming down," he said.
However, there could be a lag in the recovery of the labor market, as there was following the end of the 2001 recession.
"Job losses tend to be persistent, and the economy does turn before the job market," Karl added.
And Crary concedes that the credit crunch remains a big wild-card for any economic and job market predictions.
With fears still swirling about more bank collapses, and a possible bailout of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), it's tough to imagine a sustained improvement in the economy and job market occurring until banks sort out their balance-sheet debacles.