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US Fed may do more on joblessness

Further US Federal Reserve action to combat unemployment is 'certainly possible,' its chairman, Ben Bernanke, said.

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Source: AFP


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Further US Federal Reserve action to combat unemployment is "certainly possible," its chairman, Ben Bernanke, said.

Bernanke was asked on the US television network CBS if the Federal Reserve might inject more than the $US600 billion ($A606.55 billion) already planned during the seven months to June.

"It's certainly possible," he said.

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"It depends on the efficacy of the program. It depends, on inflation. And finally it depends on how the economy looks," Bernanke added.

The interview was done last Tuesday, three days ahead of the release of monthly unemployment figures showing that US unemployment rose in November to 9.8 per cent after holding steady at 9.6 per cent the three previous months.

"Unemployment is just about the same as it was in mid 2009, when the economy started growing. So, that's a major concern. And it looks that at current rates, that it may take some years before the unemployment rate is back down to more normal levels," he stressed.

Asked about inequalities, Bernanke stressed there was a yawning unemployment gap based on educational achievement levels.

"If you're a college graduate, unemployment is five per cent. If you're a high school graduate, it's 10 per cent or more. It's a very big difference," Bernanke said.

"It leads to an unequal society and a society which doesn't have the cohesion that we'd like to see."

The statement on possible additional action is consistent with the Federal Reserve's pledge on November 3 when it rolled out the controversial $US600 billion spending plan to boost the US recovery. It said at the time it would revisit its action regularly and possibly broaden or reduce its scope.

Bernanke also had some tough words for critics of his strategy.

"What they are doing is they're looking at some of the risks and uncertainties with doing this policy action, but what I think they're not doing is looking at the risk of not acting," he said.

"I think a very high unemployment rate for a protracted period of time, which makes consumers, households less confident, more worried about the future -- I think that's the primary source of risk that we might have another slowdown in the economy."

He said it was critical that the US economy not start losing ground now.

"We need to play close attention to the fact that we are recovering now. We don't want to take actions this year that will affect this year's spending and this year's taxes in a way that will hurt the recovery," Bernanke said.

"That's important. But that doesn't stop us from thinking now about the long term structural budget deficit."


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