Federal Reserve Bank of Boston President Eric Rosengren said the harm from long-term unemployment warrants a powerful effort by the Fed to boost the labor market.
“If spells of unemployment have a persistent impact on income, wealth and home ownership, then a more aggressive response to persistently high unemployment rates is warranted,” Rosengren said today in the text of remarks prepared for delivery in Boston.
Rosengren, who spoke just minutes before the Labor Department released its monthly jobs report, focused on the effect of educational attainment on a person’s economic well- being. The economy added 88,000 jobs in March and a slump in the size of the labor force pushed the unemployment rate down to 7.6 percent, a four-year low, indicating the U.S. labor market is struggling to make bigger strides.
The Boston Fed chief has supported the central bank’s monthly purchases of $85 billion in Treasuries and mortgage- backed securities to try to bring down unemployment, now at 7.6 percent. The Fed previously bought $2.3 trillion of assets in two earlier quantitative-easing programs. Rosengren holds a vote on monetary policy this year.
Drawing on research from Boston Fed economists, Rosengren said “during economic downturns, those with poor educational attainment are disproportionately likely to become unemployed.”
“Unemployment can have a far-reaching impact on other aspects of life, including expected future earnings, wealth and home ownership,” he said to the Early Childhood Summit 2013 at the Boston Children’s Museum.
Rosengren cited data showing that 11.2 percent of people with less than a high school diploma were unemployed, compared to 3.8 percent of people with a bachelors degree or higher.
“More rapid economic growth is likely to not only reduce the unemployment rate, but also reduce some of the collateral damage the economy may otherwise face from the spells of long- duration unemployment,” he said. “Continued accommodative policy, such as continuing our asset purchase program through this year, is an appropriate response to labor market scarring.”
Rosengren, 55, became president of the Boston Fed in July 2007, and had previously served in the economic and supervision departments of the bank.
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