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Thursday
Mar012012

Bernanke Warns Banking Committee of Chronic Long-Term Unemployment

Alex Wong/Getty Images(WASHINGTON) -- Federal Reserve Chairman Ben Bernanke told senators Thursday that he is concerned that chronic long-term unemployment threatens to reduce the U.S.'s supply of skilled workers.
 
Bernanke says that more than 40 percent of America's unemployed -- 5.5 million people -- have been out of work for more than six months. He says that if the problem persists, more of the long-term unemployed will lose job skills and struggle to regain them.
 
But Chairman Bernanke said he does not expect that the recession will cause lasting damage to the U.S. economy’s ability to grow.
 
Testifying Thursday before the Senate Banking Committee, Bernanke said, "We do not see at this point that the very severe recession has permanently affected the growth potential of the U.S. economy, although we continue to monitor productivity gains and the like."

As he has done before, Bernanke warned Congress about the need to come up with a long-term plan to reduce the deficit. "The United States is on an unsustainable fiscal path looking out over the next couple of decades,” he said. “If we continue along that path, eventually we will face a fiscal and financial crisis that will be very bad for growth and sustainability.”

The Fed chairman told the Senators the economic recovery still has a ways to go. "The recovery is not yet complete, unemployment remains high, the rate of growth is modest,” he said.

As for housing, Bernanke said the market still remains a difficult area. "We are hoping for price stabilization. We think once people have gotten a sense that the housing markets have stabilized, they will be much more willing to buy and the banks will be more willing to lend,” Bernanke said. “But right now there is still uncertainly about where the housing market is going, which I think is troubling."

As the economy gets better, Bernanke said he expects interest rate to go higher. "At some point the economy will strengthen and the Fed may have to raise interest rates,” he told the committee. Eventually, interest rates will rise, he said: "We just don’t know when."

Copyright 2012 ABC News Radio







ABC News Radio