Arab Today, arab today bernanke doubts sharp drop in unemployment
Last Updated : GMT 16:47:16
Arab Today, arab today
Arab Today, arab today

Bernanke doubts sharp drop in unemployment

Arab Today, arab today

Arab Today, arab today Bernanke doubts sharp drop in unemployment

New York - Arabstoday

While welcoming the decline in the unemployment rate to 8.3pc last month from 9.1pc in August, the Fed chief said a significant chunk has come from a slowing in the pace at which companies are cutting jobs, with a smaller amount coming from the \"moderate\" improvement in the rate at which people are being taken on. The improvement in the labour market that is unfolding may still be a reaction by companies to the very sharp increase in unemployment in the months that followed the collapse of the country\'s banking sector in the autumn of 2008, when the rate surged from 6.1pc in September to 10pc just over a year later, Mr Bernanke said. \"What we may be seeing now is the flip-side of the fear-driven layoffs that occurred during the worst part of the recession, as firms become sufficiently confident to move their workforces into closer alignment with expected demand for their products,\" the Fed chairman told a conference in Washington on Monday. The analysis of the jobs market suggests that the world\'s most powerful central banker hasn\'t so far wavered from the pledge given by the Fed in January that interest rates need to remain at record low levels until the end of 2014. Although there was no explicit hint of a third round of quantitative easing, economists said that the speech was a rebuttal to those questioning whether the US economy still requires very loose monetary policy. \"Bernanke is incredibly downbeat,\" said David Semmens, an economist at Standard Charetred. \"Questioning whether the momentum in the labour market can be maintained, seeing the jobs data as being out of sync with the lackluster growth of late.\" The combination of an improving labour market and rising inflation has strengthened the opposition of some at the Fed to any further QE. James Bullard, the president of the Fed\'s St. Louis branch, said late last week that monetary policy may be at a turning point and that the first increase in interest rates could come at the end of next year. That resistance to further QE was echoed today in Paris by Charles Plosser, who runs the Fed\'s Philadelphia branch. \"Granting vast amounts of discretion to our central banks in the expectation that they can cure our economic ills or substitute for our lack of fiscal discipline is a dangerous road to follow,\" Mr Plosser said. While neither Mr Plosser or Mr Bullard have votes this year on the Federal Open Market Committee - the US central bank\'s equivalent of the Monetary Policy Committee in the UK - their comments reflect the division among economists on how to intepret the recent run of better data from the US. In a further defence of the Fed\'s current policy, Mr Bernanke said that the majority of unemployment could be put down to cyclical, rather than structural, causes, giving monetary policy a role in reducing it. \"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,\" Mr Bernanke said.

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