Tuesday, February 23, 2010
A top Federal Reserve official warned Monday that even as the economy starts to grow again, employers are likely to continue squeezing more productivity out of workers rather than start hiring new ones, thereby prolonging the economic crisis for the millions of unemployed.
In remarks at the University of San Diego, Federal Reserve Bank of San Francisco President Janet Yellen said that rather than experiencing a “V-shaped recovery,” the economy will continue to be sluggish and won’t be operating at its full potential until 2013.
As reasons, she cited consumer anxiety due to the high unemployment rate; a housing sector that “could weaken again”; “very nervous and exceedingly cost-conscious” businesses; and a commercial real estate market that won’t contribute to growth “for some time.”
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For workers, though, her prognosis was particularly dire: the labor market will be slow to recover because businesses have learned that they can cut workers yet maintain output.
“There is an alternative explanation regarding the events of last year, though, that bodes poorly for rapid employment gains going forward,” she said in her prepared remarks. “According to this view, last year’s large increase in productivity is here to stay. In that case, we won’t see a quick drop in unemployment and may be in for a jobless recovery akin to those in the early 1990s and early 2000s. This is closer to my view and broadly consistent with my forecast,” she said. She continued:
This article was posted: Tuesday, February 23, 2010 at 9:09 am