Fed Chairman comments on unemployment and deficit

| February 9, 2011

Federal Reserve chairman Ben Bernanke has warned that stubbornly high unemployment will remain.

Mr Bernanke said the weak labour market means a recovery is not yet “truly established.”

His comments come despite the drop in the US unemployment rate last month.

Last week, the Labor Department reported the unemployment rate in the US fell from 9.4% in December to 9% in January – confounding expectations of a rise to 9.5%.

However, the large fall was attributed to jobseekers giving up looking for work, so they ceased to be classified as unemployed.

The Fed Chairman said it will take around a decade to return to a sustainable unemployment rate of 5%-6%.

Mr Bernanke also expressed concern for the budget deficit. The current budget deficit stands at 9% of GDP and is projected to fall to 5% in 2015.

However, like many other economies, tough austerity measures introduced to trim the budget deficit could hamper economic growth and slow the economic recovery.

Meanwhile, he said US inflation remains quite low – vastly different from other major economies who are battling with rising inflation as food and commodity costs soar across the globe.

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