Fed Says Joblessness Would Be 7% With Less Consumer Doubt |
| Bloomberg - Sep 17, 2012 |
The U.S. unemployment rate would be around 7 percent instead of 8 percent to 9 percent without the current level of doubt among consumers about economic issues including fiscal policy, a Federal Reserve study showed.
“Uncertainty has pushed up the U.S. unemployment rate by between one and two percentage points since the start of the financial crisis in 2008,” Sylvain Leduc and Zheng Liu, who are research advisers at the San Francisco Fed, wrote in a paper released today. “The private sector responds to rising uncertainty by cutting back spending, leading to a rise in unemployment and reductions in both output and inflation.”
The Federal Open Market Committee on Sept. 13 announced it will hold interest rates near zero until at least mid-2015 and purchase $40 billion a month in mortgage debt until the labor market improves. The unemployment rate has exceeded 8 percent for 43 months, Labor Department figures showed Sept. 7.
Consumers’ doubts about the economy may have been a greater drag on the economy in the past few years compared to previous recessions because policy makers had never run out of room to lower the federal funds rate until 2008, Leduc and Liu said.
Read Full Article from Bloomberg
- Posted: 2012-09-17 13:49:15
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