Former Federal Reserve Chairman Alan Greenspan predicted Sunday the nation’s unemployment rate is likely to top 10 percent in coming months before the situation begins to improve.
In an appearance on ABC’s “This Week” with George Stephanopoulos, Greenspan said there are some signs the economy is starting to improve. But until companies create a substantial number of new jobs, the unemployment figure is likely to continue to rise in the near future, he said.
Pointing to the fact that businesses laid off “a very substantial number of people” when the financial markets collapsed last year, Greenspan said the country got productivity gains “of horrendous amounts,” which cannot continue.
“So the silver lining is, at some point, we’re going to start to see an improvement in employment,” Greenspan said, according to a printed transcript of the program. “But remember that unless there is a monthly increase of more than 100,000 a month, you’ve still got the unemployment rate continuing to rise.”
He said that while the economy is likely to show stronger-than-expected growth for the third quarter, that does not mean unemployment will go down immediately.
“My own suspicion is that we’re going to penetrate the 10 percent barrier and stay there for a while before we start down,” he said.
Greenspan’s remarks came just two days after the Labor Department reported an unemployment rate of 9.8 percent, the highest jobless figure since 1983.
Greenspan said lawmakers should not consider new stimulus plans in response to weak job figures and other “soft” data.
“Oh, no new stimulus for two reasons. One, only 40 percent of the first stimulus has been in place. And there is a considerable debate going on in the economics profession about how effective this stimulus package is,” he said. “So in my judgment, it’s far better to wait and see how this momentum that has already begun to develop in the economy carries forward.”
But he added that extension of unemployment benefits should not be counted as any sort of stimulus, and should be considered.
“This is an extraordinary period and temporary actions must be taken, especially to assuage the angst of a very substantial part of our population,” he said. “So I don’t actually consider those types of actions stimulus programs.”
(c) 2009, MarketWatch.com Inc. Source: McClatchy-Tribune Information Services.