NEW YORK – U.S. Economic growth will remain moderate, which will keep jobless rates high, Federal Reserve Board Vice Chairman Donald Kohn said late Thursday.
“If labor productivity growth slows to a more normal rate of increase, then further increases in demand and production should lead to additional increases in hiring,” Kohn told an audience in San Francisco, according to prepared text released by the Fed. “However, if economic growth remains moderate, as I anticipate, employment gains are likely to lower the unemployment rate only slowly.”
Also, Kohn noted, there is concern that “unemployed workers may experience unusual difficulties in re-entering the workforce” because long periods of unemployment “could erode worker skills and decrease re-employment probabilities.” At the very least, he said, it will take time to move or retrain workers for new jobs.
“For these and other reasons, part of the increase in unemployment over the past two years may be structural, and this part would tend to reverse only slowly,” he added.
The recovery will be slow, not sharp, with “a gradual pickup in economic activity as the forces that got us into this difficult situation slowly fade away,” Kohn said.
