October 5 2009: World Bank/IMF Annual Meetings. Istanbul, Turkey. Development Committee (DC) meeting. World Bank President Robert Zoeelick and IMF Managing Director Dominique Strauss-Kahn.

Global unemployment will not begin falling in many countries for  another 10 to 12 months; Obama considering job supports

Global unemployment will not begin falling in many countries for  another 10 to 12 months, as the economic recovery takes root, the head of the International Monetary Fund (IMF) said on Monday. On Monday, the Obama administration said it it looking at a number of programs, which would support jobs.

For many countries "we all know it is very fragile, both because unemployment is lagging behind and for many countries it will take ten to twelve months to have unemployment decreasing," IMF managing director Dominique Strauss-Kahn said at a news conference on the eve of IMF and World Bank meetings in Istanbul.

"That is for advanced economies, it can be worse in some low-income economies," he said. "So, there is no way to say the crisis is over when we still have this big rise in unemployment in front of us, even if growth is coming back."

Strauss-Kahn said that in many countries, including African countries, the reaction to the crisis was much better than probably would have been a decade ago, because in many countries, the right policy put in place and the advice of the World Bank and the IMF had created some fiscal room, some monetary room which made it possible for government to have some policy to tackle the crisis.

"So, the gain hard won during the last years cannot be lost, and that's why we need absolutely to provide the low-income countries and also some emerging countries with enough resources just to keep their head out of the water and be able to take advantage of the recovery which is just arriving," he said.

In Istanbul, Nobel Prize-winning economist Joseph Stiglitz said that US unemployment is going to keep rising and should be the main focus for policy makers, and that gains in the stock market indicate investors have been “irrationally exuberant” about a recovery.

“There’s a lot of risk going ahead of some big bumps,” he said today in a Bloomberg Television interview from Istanbul, citing housing, commercial real estate and consumers’ inability to pay off credit cards because of job losses. “There’s a very big risk that markets have been irrationally exuberant.”

The US has lost 7.2 million jobs since the recession began in December 2007, and the unemployment rate reached a 26- year high in September, a Labor Department report last week showed. The broad unemployment rate is at  17 percent.

The unemployment rate for 16 to 19-year-olds hit 25.9 percent in September, the highest rate recorded since at least 1948 (the earliest data the Labor Department supplies). It compares with 16.9 percent in December 2007, at the start of the recession.

Steven Blitz, an analyst at US firm Pangea Market Advisory said: “the percentage of unemployed that have been out of work more than 27 weeks has jumped to 35.6 percent… This is the first recession where those out of work more than 27 weeks not only exceeds the under 5 week group (19.4 percent) it exceeds the short-term unemployed by extraordinary proportions… The trend for the unemployed since 1980 has been to be out of work an increasingly longer period of time. When these data are lined up with the $385 billion drop in wage and salary disbursements in the past 12 months, it is difficult to imagine consumer spending at the starting line of a cyclical upswing.”

It’s “pretty clear that the situation will continue to get worse,” Stiglitz told Bloomberg citing elements of the jobs report such as the number of people who can’t find a full-time job and the pace at which Americans are dropping out of the labour force.

Economic growth this year and next will “fall well short of what we need to stop unemployment from growing,” he said. The likelihood that the US economy will be “out of the woods” before most of the measures in the Obama administration’s stimulus package expire in 2011 is “very small,” he also said.

Also on Bloomberg Television, Goldman Sachs economist Jim O’Neill said the IMF/World Bank meetings in Istanbul are “stuck” in an outdated mentality that doesn’t reflect the rising power of emerging economies following the global financial crisis.

O’Neill also said the dollar probably isn’t the No. 1 concern for US policy makers, and predicted 4.1 percent growth for the global economy next year.

Many countries will be “surprising” in their economic growth in 2010, he said, while adding that there is a potential for more “positive surprises” that could help fuel global expansion.

Last week, the IMF in its  World Economic Outlook, revised up its forecast for global growth in 2010 from 2.5 percent to 3.1 per cent.

Joseph Stiglitz, a professor at Columbia University and Nobel laureate, talks with Bloomberg's Francine Lacqua about the possible risks to economic recovery in the US:

http://www.youtube.com/watch?v=wJrLqTMK8f0

US President Barack Obama is not planning to launch another stimulus package but his advisers are mulling over a range of programs for creating jobs, White House spokesman Robert Gibbs said on Monday.

Extending the public subsidy  of 65 per cent for COBRA health insurance plans which allows an employee who leaves a company to continue to be covered under the company's health plan, for a certain time period and under certain conditions. The name results from the fact that the program was created under the Consolidated Omnibus Reconciliation Act. The system is designed to prevent employees who are between jobs from experiencing a lapse in coverage.

Another option is continuing the $8,000 tax credit for first-time home buyers.

Discussing whether tax cuts will help create jobs, with CNBC's John Harwood; Robert Reich, "Supercapitalism" author; Finfacts contributor Dr. Peter Morici and University of Maryland professor; and CNBC's Michelle Caruso-Cabrera: