Federal Reserve chairman Ben Bernanke said long-term unemployment was an American “national crisis” and urged the US government to take further action to combat it.
The job situation we have is really a national crisis
Mr Bernanke, who also said the government should provide more help to the battered housing industry, noted that about 45 per cent of the unemployed had been out of work for at least six months.
“This is unheard of,” he said in a question-and-answer session after a speech in Cleveland, Ohio.
“This has never happened in the post-war period in the United States. They are losing the skills they had, they are losing their connections, their attachment to the labour force.
“The unemployment situation we have, the job situation, is really a national crisis.”
Mr Bernanke said the government needed to provide support to help the long-term unemployed retrain for jobs and find work and suggested that congress should take more responsibility.
Responding to a question, Mr Bernanke said long-term unemployment, budgetary discipline and housing policy were the three most important areas where congress could contribute to an economic recovery.
“There are certainly some areas where other policymakers could contribute,” he said.
His comments were his latest in a public effort to make congress act further to rejuvenate the economy. He suggested that the Fed could achieve only so much through policies that seek to lower long-term interest rates.
“The Federal Reserve has made enormous efforts to try to help this economy recover and stabilise” though its control of interest rates, or monetary policy, he said. Those policies had driven rates to record lows, he said.
“Monetary policy can do a lot, but monetary policy is not a panacea,” he added.
On the housing crisis, Mr Bernanke said strong government programmes to help the industry recover would help the Fed’s own efforts to boost housing by driving mortgage rates to their lowest levels in decades.
In his speech, Mr Bernanke said the United States and other rich nations could relearn a few lessons from fast-growing developing nations.
He said the successful emerging economies such as China had adopted disciplined budget policies, embraced freed trade, made public investments and supported education.
But in the question-and-answer period, Mr Bernanke warned US politicians against cutting deficits too quickly to reduce budget debt. He has said that could put the fragile economy at risk.
He noted in his speech that emerging markets such as China accounted for a large and growing share of the global economy, so they needed to act accordingly.
“With increasing size and influence comes greater responsibility,” Mr Bernanke said, adding that emerging nations would be challenged in the future by their reliance on exports to drive growth.
The Obama administration has been pushing the Group of 20 major economies, which includes traditional powers such as the United States and emerging economies such as China, Brazil and India, to boost domestic demand rather than relying so heavily on exports to rich nations.