Unemployment to Plague U.S. Economy for Years Says Fed Official

Nov. 10, 2009
San Francisco Fed chair says economy will 'remain vulnerable to shocks' as weakness of the commercial property market combine with the muted outlook for housing and consumer spending.

Unemployment, now in the double digits, may remain "high" for several years and dampen economy recovery from a brutal recession, a regional central bank official warned on Nov. 10.

The U.S. has experienced jobless recoveries following the previous two recessions in 1991 and 2001, when job creation remained weak for several years following the business cycle trough. "In both cases, output growth was less robust than in the typical recovery and, unfortunately, things seem to be shaping up similarly this time around," said Janet Yellen, president of the Federal Reserve Bank of San Francisco.

Unemployment jumped to double digits in October for the first time since 1983, reaching 10.2%, although job losses narrowed to 190,000, the government said last week.

President Barack Obama called the numbers "sobering" and said his administration was considering "further steps" to spark job growth.

Yellen said overall economic recovery was likely to be gradual and "remain vulnerable to shocks" as weakness of the commercial property market combined with the muted outlook for housing and consumer spending. "With such a slow rebound, unemployment could well stay high for several years to come. In other words, our recovery is likely to feel like something well short of good times," Yellen said.

The world's largest economy grew at a seasonally adjusted 3.5% annual rate in the July-September period. The increase was the first since the second quarter of 2008.

Copyright Agence France-Presse, 2009

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