Unemployment is likely to remain above 6 percent for at least three more years, Federal Reserve Chairman Ben Bernanke said during testimony in front of the House Financial Services Committee today. Responding to questions from Rep. Michael Fitzpatrick (R-PA), Bernanke said a “reasonable guess” for when unemployment will finally come down to 6 percent is 2016:
FITZPATRICK: The Fed has indicated it believes long-term unemployment rates will settle at around 5.2 percent or 6 percent.
BERNANKE: That’s our best guess.
FITZPATRICK: An understanding I heard your testimony earlier about predicting the future. When would you say we might get to around 6 percent? And also, the American people, they believe natural unemployment is actually much lower than that given what we experienced in the 1990s. Maybe your suggestion as to how we address that expectation.
BERNANKE: Again, it’s hard to predict. But a reasonable guess for 6 percent would be around 2016.
That unemployment remains high and will continue to do so for at least three more years would seem yet another argument against sequestration, the automatic budget cuts that will begin taking effect Friday. Indeed, Bernanke was outspoken in his opposition to further fiscal contraction during his testimony, repeatedly saying the budget cuts could damage the economic recovery and that the Federal Reserve, which has been acting to stimulate the economy through monetary means for months, could use help from Congress.
Instead of offering that help, Congress remains focused on deficit reduction, even as evidence mounts that the only spending problem America has right now is that the government isn’t spending enough. But Republicans have repeatedly blocked efforts to further stimulate the economy, choosing instead to push spending cuts that have held back the recovery. The looming round of cuts will only make that worse: the Congressional Budget Office projects that sequestration will knock 0.6 percentage point off economic growth while resulting in the loss of more than 700,000 jobs.