Fed: High Jobless Rate Here to Stay
The Los Angeles Times reports:
The American economy grew faster in the third quarter this year than previously estimated, but that bit of encouraging news was overshadowed by a grim new forecast from the Federal Reserve that predicted unemployment would remain at about 9% next year and stay high for years to come.
The pessimistic long-term outlook underscored the possibility that the United States — after years of good times that cast a rosy glow over the American dream and raised personal expectations for the future — may now be headed for a grayer, more financially constricted decade or more.
Such a development not only carries major political implications but threatens the prospects for millions of ordinary Americans, from young people seeking to start careers and families to older people facing the prospect of seeing their golden years less golden.
In fact, some Fed policymakers on Tuesday raised the specter of a permanently higher jobless rate for the U.S. economy, suggesting that many more workers will struggle to get back on their feet even as the economy continues to grow.
The Fed's forecast is an acknowledgment that the "healing process in the economy has slowed to a crawl," said Ethan Harris, an economist at Bank of America Merrill Lynch.
The central bank's predictions were released Tuesday as part of the minutes of its early November meeting, when the institution also approved its controversial bond-buying program to spur economic growth.
The nation's unemployment rate has been stuck at 9.6% since August.
Just a few months ago, Fed officials were more optimistic about the road ahead — for jobs and the overall economy. But now they see the economy growing by about 2.5% this year, not enough to make a dent in unemployment.
And next year, policymakers said, the economy was likely to increase 3% to 3.6%; their previous forecast in June called for growth of as much as 4.2%.
The Fed's downgraded outlook was released hours after the government reported that economic growth in the third quarter was slightly higher than previously thought. The Commerce Department revised economic growth upward in the July-to-September period to an annual rate of 2.5%. The earlier estimate had been 2%.
The GDP revision was an encouraging sign, as gross domestic product, the broadest measure of economic activity, showed a marked improvement from the anemic 1.7% growth rate in the second quarter. Revisions showed stronger gains in consumer spending, exports and business investments.
Even so, analysts say GDP growth of at least 3% is needed to bring down the jobless figure — and many don't expect the economy to perform that well in the fourth quarter or early next year.
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