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Wednesday, March 2, 2011

Economic signs optimistic, unemployment rate likely to remain high Bernanke states

Official portrait of Federal Reserve Chairman ...Image via Wikipedia
Federal Reserve Chief Ben
Bernanke believes that U.S.
unemployment is likely to
remain high for years to come.

Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee on March 1st that there is more evidence of an economic recovery and the risk of inflation remains low, but that the unemployment rate will remain high for years to come. 

Bernanke’s report is sobering news for many job seekers and especially jobless 99ers who have been out of the employment market for nearly two years.
"Following the loss of about 8.75 million jobs from early 2008 through 2009, private-sector employment expanded by only a little more than 1 million during 2010, a gain barely sufficient to accommodate the inflow of recent graduates and other entrants to the labor force," Bernanke said.

 Bernanke did however note that recent declines in the unemployment rate, with the drops to new claims shows some, albeit small, optimism for the employment market.
“We do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in December and January, a drop in new claims for unemployment insurance, and an improvement in firms' hiring plans,” he cited. 
"Even so, if the rate of economic growth remains moderate, as projected, it could be several years before the unemployment rate has returned to a more normal level."

Bernanke advised that the overall U.S. jobless rate would be in the range of 7.5 to 8 percent at the end of 2012.

On the economic recovery, Bernanke noted that consumer spending, business investment and manufacturing output show positive signs for the immediate future.
"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," Bernanke said. "Notably, real consumer spending has grown at a solid pace since last fall, and business investment in new equipment and software has continued to expand. Stronger demand, both domestic and foreign, has supported steady gains in U.S. manufacturing output."
But, he also acknowledged that a prolonged rise in the price of oil would represent a "threat" to economic growth and to inflation. In addition, Bernanke noted that the House Republican plan to cut spending would reduce economic growth and employment.

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Jazzie Casas said...

There is an interesting debate in the blogosphere exploring the reasons for the persistent high unemployment rates in the US and elsewhere. Conservatives lay the blame on the structural skills mismatch and argue that this cannot be resolved through any stimulus spending measures. Liberals claim that the massive slump in aggregate demand from the boom, means that there are massive idling resources which can be brought to work with an appropriately structured stimulus program.

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Stop Spending Money said...

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