Bernanke: For Job Creation, It's a Long, Slow Slog
With the U.S. economic recovery seemingly stalled, many Americans -- including millions of unemployed -- are wondering what can be done to prod the economy into higher gear and get employers hiring again.
The biggest problem that Washington policymakers face is that there is little the Federal Reserve, the nation's central bank, can do to stimulate the economy. Interest rates -- at near-zero percent -- have been holding at historic lows for two years, and a recent $600 billion round of purchases in Treasury bonds by the Fed seems to have done little to spark a rebound.
As the misery drags on, Fed Chairman Ben Bernanke said Wednesday that it might be time to try yet another novel approach to stimulate growth and eventually hiring.
In his semiannual report to Congress on the economy and monetary policy, Bernanke told lawmakers that his agency is examining several "untested" means to stimulate growth if the economy deteriorates further, MarketWatch.com reported, even though the temporary shocks weighing on economic activity are likely to pass.
"The possibility remains that the recent weakness may prove more persistent than expected and that deflationary risks might reemerge, implying additional policy support," Bernanke said in testimony before the House Financial Services Committee.
The Fed chairman floated several options, including a pledge to hold interest rates at their record low levels and engage in another round of government bond purchases -- what some analysts are calling "QE3," for the third round of "qualitative easing." Another option would be to reduce the interest rate that the agency pays to banks on excess reserves held by the Fed.
Bernanke pretty much confirmed that the Fed isn't down to its last bullet, Daniel Flynn, an analyst at PFGBest Research, told Reuters. "[I]t still has ammunition to support the economy."
The Fed chairman's comments followed two months of disappointing job-creation data. In June, employers added a mere 18,000 jobs, the Department of Labor reported earlier this month. That was well below analyst expectations and well below the 125,000 jobs needed each month just to keep pace with U.S. population growth.
Bernanke said temporary conditions, including high fuel prices during the last few months, were partly responsible for meager economic and job growth, Bloomberg News reported. Further, he expected the nation's economy to pick up steam in the second of the year, with growth topping 3 percent.
No Quick Fixes
"Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation," Bernanke said in prepared remarks.
Still, he said he expected no quick improvement in the nation's languid labor market. The nation's unemployment rate, which rose to 9.2 percent in June, is expected to remain at around 9 percent for the remainder of the year, Bernanke said, citing a recent forecast by Fed officials.
Those same expectations call for the jobless rate to slowly decline but still be in the range of 7 percent to 7.5 percent by the end of 2013, well off the pre-recession levels of 4.5 to 5 percent.
To analysts, at least, it appears that Bernanke has a few novel tricks that he can pull out of his magic bag to get America's job-creation engine restarted. Meanwhile, millions of unemployed Americans are hoping that he can conjure up something -- and fast.
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David Schepp has spent more than a dozen years covering business news for the electronic and print media, including Dow Jones Newswires, BBC News, Gannett Co., and most recently at AOL's DailyFinance. Nearly 10 years ago, he started writing a weekly People@Work column, looking in depth at issues facing workers in today's workplace. Follow David on Twitter. Email David at firstname.lastname@example.org. Add David to your Google+ circles.more...