Fed chairman warns of high unemployment

| September 29, 2011 | 0 Comments

Federal Reserve Chairman, Ben Bernanke, has warned that the world’s largest economy is facing a national crisis due to its high unemployment rate, which currently stands at 9.1%.

Earlier this month, the US Labor Department revealed the economy added no new jobs last month, which was a surprise after markets had expected 70,000 new jobs.

This represented the first time since 1945 that there has been a zero payrolls figure after 17,000 jobs were added in the private sector last month but these were cancelled out by 17,000 jobs lost in the public sector.

The economic recovery in the US remains sluggish in the face of higher unemployment and a depressed housing market.

In a speech in Cleveland, Mr Bernanke said: “This unemployment situation we have, the jobs situation, is really a national crisis.

We’ve had close to 10 percent unemployment now for a number of years and, of the people who are unemployed, about 45 percent have been unemployed for six months or more. This is unheard of.”

He is urging the Government to assist the long-term unemployment and suggested that Congress should take more action to address the issue.

Earlier this month, President Barack Obama addressed the nation about a plan for job creation. He unveiled a $450 billion (£282 billion) package aimed at boosting the economy and reducing the federal deficit.

The bill includes tax cuts to workers and small businesses to boost job creation.

Mr Obama has previously said job creation is a top priority; continued high unemployment could threaten his prospects for re-election next year.

In the meantime, Mr Bernanke urged policymakers to introduce “housing policies” to boost the property market, which is currently struggling and many have suggested it is holding back the recovery.

Demand for housing in the US remains weak, despite mortgage rates hovering at record lows and falling house prices – the latter due to millions of home repossessions.

According to Bernanke, long-term unemployment, budgetary discipline and housing issues are the three crucial areas where Congress could contribute to an economic recovery.

He concluded that the Fed can only do so much by keeping interest rates at their historic low and said: “Monetary policy can do a lot, but monetary policy is not a panacea.”

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