By: Dr. Mike Campbell
Federal Reserve Chairman, Ben Bernanke, has warned that US unemployment is likely to remain at a high level for several years to come. US unemployment remains at 9% and has improved over the past 2 months. Despite this, Bernanke noted that reluctance amongst employers to engage new staff meant that "it will be several years before the unemployment rate has returned to a more normal level".
Based on the growth seen in 2010, where the GDP was 3.2%, it could take up to 10 years for unemployment to return to its pre-crisis level of 5 to 6%. However, Mr Bernanke is predicting growth to increase over the course of 2011 which would shorten this timeframe.
The Future of the US Economy
Inflation within the American economy is not problematic, according to the Chairman and he noted that the economy had strengthened over the past few months. Despite this, the Federal Reserve is pressing ahead with its quantitative easing project which will see the second half of a $600 billion injection of capital into the economy by June. According to some sources, the programme may have saved the jobs of some
3 million American workers. The Federal Reserve will review the situation at the end of June to see if further measures are needed or not.
Bernanke described America’s deficit as “unsustainable” and said that the challenge of reducing it was “daunting”. He advocated long-term measures to reduce the deficit and get America’s debt burden under control, taking the view that a more radical approach would risk putting the recovery in jeopardy. The current US deficit is running at 9% of GDP and the nation’s debt stands at 60% of its GDP. Unless steps are taken to reduce debt, it is predicted to rise to 150% of GDP by 2030; a situation Mr Bernanke described as becoming unbearable by 2035 to 2015 – but then that will be on somebody else’s watch.