Federal Reserve Chairman Ben Bernanke warned that the unemployment rate would remain well above 7 percent through the end of 2012, and the duration of President Obama’s current term.
Bernanke, in saying that the Fed had no immediate plans to provide additional support to the economy, dashed the hopes of some economists and executives who have been pushing for action to add momentum to the sluggish recovery, The New York Times reports.
Bernanke also sounded a discouraging note for Washington incumbents facing tough re-election fights.
Bernanke told the Senate Banking Committee that it would take “a significant amount of time” to restore the 8.5 million jobs lost in the United States in 2008 and 2009.
He also warned that financial conditions, particularly the European debt crisis, had “become less supportive of economic growth in recent months.”
He called the slow recovery of the job market “an important drag on household spending.” And he noted that the growth in private payrolls — about 100,000 jobs a month in the first half of the year — was “insufficient to reduce the unemployment rate materially.”
The Fed expects the economy to grow this year by 3 to 3.5 percent, picking up only slightly, to 3.5 to 4.5 percent, in 2011 and 2012. The unemployment rate is projected to drop to 7 to 7.5 percent by the end of 2012 — still far higher than the 5 to 5.3 percent that the Fed now considers to be full employment.
Meanwhile, new U.S. claims for jobless benefits climbed more steeply than anticipated last week, the latest sign that the moribund labor market is struggling to recover.
Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 464,000 in the week ended July 17, the Labor Department said on Thursday, more than erasing a decline in the prior week.
Analysts polled by Reuters had forecast claims rising to 445,000 from the previously reported 429,000 in the July 10 week, which was revised slightly down to 427,000 in Thursday's report.
The report covered the survey week for government's closely monitored employment report for July, which is scheduled for release on Aug. 6, and added to a growing list of indicators indicating a moderation in the economic recovery pace, Reuters reported.
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