Federal Reserve’s Efforts to Curb Unemployment Falling Short

Sept. 27, 2010 - PRLog -- The nation’s unemployment crisis is far from over, and the recovery is taking much longer than expected, according to Federal Reserve Chairman Ben Bernanke.  Bernanke’s comments came just days after a new report showed that the unemployment rate went up in 27 states in August, after experts had expected those rates to go down.

Bernanke said that the Fed’s efforts to drive up the economy – and improve the unemployment situation in the process – have fallen way short.

Originally, the Fed decided to keep interest rates as close to zero as possible, in hopes that it would kick start the economy, and that companies would start to hire more unemployed workers.  However, the interest rate was lowered nearly a year ago, and the unemployment crisis is only getting worse.

In an effort to improve the nation’s unemployment rate, the Fed may create a program that would buy large amounts of government debt.  The goal would be to lower the rates on mortgages and other loans, so that Americans started spending more money.  

Why are mortgages so crucial to helping millions of unemployed workers find jobs?

A near-record low number of Americans purchased new homes in August, which keeps more people out of work.  With no new houses to build, construction companies cannot hire new workers.  Last week, construction experts said that, on average, every new home that needs to be built creates three jobs for at least a year.  Until the housing market starts to recover, the unemployment rate will likely stay high.

During a speech at Princeton University, Bernanke said the Fed is currently studying housing bubbles – and what causes them to burst.  According to Bernanke, the knowledge will help Fed policymakers identify issues in the housing market before it is too late, so that they can take steps to keep the bubble from bursting, like it did in 2008.

"The great majority of economists did not foresee the near-collapse of the financial system," said Bernanke.

For more on this story – along with a look at the other unemployment news of the day – log onto http://unemployment.info.

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