Thursday, July 23, 2009

Jobless economic recovery in the US

The Federal Reserve Board's Chairman has to go to Congress and report about the nation's economic health every six months.

As usual, the Fed chairman Ben Bernanke presented the same testimony to both the House Financial Service Committee and the Senate Banking Committee on July 18-19th, a ritual required in legislation written by the late lawmakers Hubert Humphrey and Augustus Hawkins, the Humphrey-hawkins Act (27th October 1977).

The Humphrey Hawkins Law intended to implement the Employment Act's (1946) assumption of Federal responsibility for achieving full employment and price stability.

Bernanke who has extensively studied the Great Depression knows the risk of braking too soon. That's what happened in 1937, which fiscal and monetary policies both tightened, in part of misplaced fear of inflation. That set the stage of the second leg of the Great Depression that followed growth from 1933 to 1936 that averaged over 9%, but still left unemployment well in double digits.

With the US unemployment expected to range between 9.8% and 10.1% in 2010, up from the current 9.5% jobless rate, the world's largest economy appears to have turned the corner but only to a path of tepid recovery.


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