ICA faces severe problems if it cannot get more people back to work, the chairman of the Federal Reserve (Fed) argued in a speech last night.
Chairman Ben Bernanke warned that “social and economic consequences” make it vital for the US to reduce its level of unemployment.
In October unemployment was measured at 9.6 per cent, where it has stuck for the third consecutive month.
Last week the Fed revised up its projections for unemployment to 8.9--9.1 per cent for next year, after it had previously expected 8.3--8.7 per cent.
Bernanke did not comment directly on monetary policy, yet his words will be read as a further leaning towards monetary loosening.
It is almost a month since the Fed announced a second phase of quantitative easing (QE2), declaring it would buy $600bn of long-term Treasury securities over an eight month period.
Bernanke has publicly defended the policy, which is designed to “promote a stronger pace of economic recovery.”
Speaking last night he highlighted harm to the long-term unemployed, noting that 40 per cent of America’s unemployed have been out of work for over 6 months.
“This is very worrisome because when people are out of work for an extended period, their skills tend to erode,” he said.
And economic recovery is dependent on confidence, he said: “With unemployment so high that confidence is hard to come by.”