Bernanke Sees high Unemployment thru 2012

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Bernanke Sees High Unemployment Through 2012
Updated: 1 hour 50 minutes ago

Joseph Schuman

Joseph Schuman Senior Correspondent
(Feb. 24) -- High unemployment will probably persist in the coming years while inflation remains tame, allowing the Federal Reserve to keep interest rates low and the cost of borrowed money cheap for some time to come, Chairman Ben Bernanke told Congress today.

In his semiannual testimony on the economy and monetary policy -- and the first since Bernanke was confirmed to a second term -- the Fed chairman presented evidence that the economy continues to expand at a moderate pace and that deterioration of the labor market is abating.

"Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce," he said. "Of particular concern, because of its long-term implications for workers' skills and wages, is the increasing incidence of long-term unemployment; indeed, more than 40 percent of the unemployed have been out of work six months or more, nearly double the share of a year ago."
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill on Feb. 24, 2010.
Manuel Balce Ceneta, AP
Federal Reserve Chairman Ben Bernanke testifies about the economy Wednesday on Capitol Hill. "Unemployment is the biggest problem we have," he said.

Moments later, when asked how Congress should balance the need to stimulate hiring through new spending against the threat of burgeoning budget deficits, Bernanke said such deliberations were up to Congress but that "unemployment is the biggest problem we have."

Bernanke, who also described the Fed's plans to unwind billions of dollars in emergency lending programs created to confront the financial crisis, offered little surprise in his testimony to the House Financial Services Committee -- which is how central bankers like it.

Still, his remarks seemed tempered by awareness of the sensitive position of the Fed at a time when anger at the government's role in the financial crisis remains a resonant theme in American politics.

He said the Fed would welcome increased congressional scrutiny of most Fed activities, especially the emergency programs set up to bolster credit markets and fuel new lending. But he explicitly criticized a provision of House legislation on reform of financial regulation that would increase Congress' authority over interest rate policy of the Federal Open Market Committee.

"It is vital that the conduct of monetary policy continue to be insulated from short-term political pressures so that the FOMC can make policy decisions in the longer-term economic interests of the American people," Bernanke said.

The Fed's economists now expect the U.S. economy to grow at an annual rate of 3 percent to 3.5 percent this year and 3.5 percent to 4.5 percent in 2011. Unemployment is forecast to be as high as 6.5 percent to 7.5 percent by the end of 2012, and consumer prices are expected to grow at an annual rate of 1 percent to 2 percent through 2012, Bernanke said.
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With unemployment at or near 10% or higher if you include those working part-time and those who've just quit looking, obviously the need for jobs is there. But when the poverty level for a family of four (two adults and two minor children under 14) is $22,200.00 per year, you are talking about an hourly wage equating to $10.57/hour. Now when you consider that for many federal assistance programs a household income of upto 200% of the poverty is the cutoff ($44,400.00 per year or $21.35/hour) where are you going to get or produce those kind of jobs?

This country has just about outsourced all the textile mills. The auto industry is well .. I wouldn't apply for a job there, no job security. Aerospace or defense industry, how's your college degree and is it in the right subject? We've got enough home construction people out there building $500,000 homes in $33,000/year average neighborhoods.

We need some serious heavy construction and labor. Roadways and bridges across this country suck and are in terrible shape: evacating crews, paving crews, concrete work for bridges, etc. Sadly here in Geneva County yesterday we had a 51 year old man pass away in the back of an ambulance, because there was no one from the local volunteer rescue squad available and one from the nearby town had to be called. Then as the ambulance was leaving the patients home it got stuck in the mud. After 45 minutes of digging they freed the ambulance, and the man died.

This country needs more meaningful jobs, construction, steel mills, food processing, etc., but those jobs must pay at least that $10.67/hour wage. Our little small town part-time police officer only makes $10.00 per hour.

So aside from needing new jobs, we also need to get a hold of the cost of living. Let's think about it for a moment, the old rule of thumb for a home mortage was not more than 28% of the gross income. Can you find a home with a monthly mortgage payment of $518.00? Sorry to say we're screwed for the long haul, I don't see a change for many years to come.