–Household Confidence, Long-Term Unemployment Also Key Issues

By Yali N’Diaye

COLUMBUS, Ohio (MNI) – The economy is not growing fast enough to
materially reduce the unemployment rate, Federal Reserve Chairman Ben
Bernanke repeated Tuesday, while also expressing his concern about the
high level of long-term unemployment and the loss of confidence among
households.

During a “Conversation on the Economy” with business leaders at the
Ohio State University Fisher College of Business, Bernanke otherwise
made no reference to monetary policy. Nor did Cleveland Federal Reserve
President Sandra Pianalto, who moderated the panel.

While the economy has been in an expansion phase since the middle
of 2009, “we need about 2% to 2.5% real growth just to accommodate new
workers coming into labor force,” Bernanke said.

“So at the pace of growth that we are seeing, we are not growing
fast enough to materially reduce the unemployment rate,” he added.

In October, the economy created a net 151,000 jobs, better than the
41,000 decline in September, but not enough to bring down the
unemployment rate, which has been at 9.6% since August.

This has implications for household finances, for instance, making
it difficult to meet mortgage payments, “which contributes to the
ongoing foreclosure crisis.”

Despite the recent job creation, “We are still very, very short,”
Bernanke said.

The loss of confidence in household is a barrier to recovery, he
said.

Earlier Tuesday, the Conference Board reported a 4.2-point increase
in the November Consumer Confidence Index. Yet, the percentage finding
jobs “hard to get” rose despite a rise in the percentage of those
finding jobs “plentiful.”

“After two years of personal losses, it’s going to take a lot to
convince consumers that the recovery is for real,” survey chief Lynn
Franco told MNI.

Specifically, she said consumers need a significant run of robust
payroll gains. “Gains of 100, 150, 175 (thousand) won’t be enough.”

Bernanke also expressed concern about the elevated share of people
who have been unemployed for more than six months, which is “very
unusual and it’s very worrisome.”

As a result, “Getting new jobs, getting unemployment down is of
incredible importance.”

This is as far as the Fed chairman went in his economic comments.

In fact, he then limited his remarks to asking questions of other
panelists, which included Ford Motor CEO Alan Mulally and IBM CEO Samuel
Palmisano.

One element the CEOs agreed on was the need for clarity from
Washington and the need for focus on improving the business environment.

This implies making clear decisions about taxes and trade policy in
particular to establish a level playing field at the global level, they
said.

Answering Bernanke’s question on the one thing Washington should
do, Palmisano, who was the most active speaker on the panel, urged
Washington to make up its mind. Just “pick it,” he said, referring to
the tax decisions in particular.

He added the issue is not a lack of liquidity, since “There is more
than we could probably consume.”

Small business leaders on the panel, however, disagreed on that
front, noting that their lines of credit have been reduced, forcing them
to find alternative ways of financing.

** Market News International **

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