NEW YORK – Despite the economy being in recovery, businesses are still struggling, and it could be years before output returns to pre-recession levels, according to Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto.
“The recovery from the recession may also end up being one of the longest in our history. In fact, it may take years just to get back to the level of output we enjoyed in 2007, just before the economic crisis began,” she said at the Dayton Chamber of Commerce, according to prepared text of the speech, which was released by the Fed. “Some of you may think I am being too pessimistic. After all, we saw a strong GDP growth estimate for the fourth quarter of last year — nearly 6% at an annual rate. But I think that figure overstates the underlying strength of our economy right now.”
Pianalto addressed the concerns about inflation and the withdrawing of stimulus money. “This is a concern to keep in mind, but I do not see warning signs of inflation pressures on the horizon,” Pianalto said. “At the Federal Reserve Bank of Cleveland, we monitor and produce future inflation predictors, and these measures remain at low levels. We have also worked hard to develop measures of inflation expectations, and those measures also continue to show that financial markets expect inflation rates to remain low over the next five years.”
Pianalto added she’s confident the Fed will have the necessary tools to adjust monetary conditions when the time comes to do so.
Unemployment, she added, is “a huge and broad-based problem,” with the jobless figures including those who have stopped looking for work as high as 17%. Pianalto said, lack of job openings are surpassing layoffs as the key problem. “Clearly, massive layoffs contributed to these large unemployment numbers, and fortunately, layoffs slowed months ago. Our current problem is a lack of job openings. In fact, the job-finding rate now stands at a historic low. Businesses are not creating new jobs very quickly, and where labor utilization is picking up, employers are simply restoring hours that had been previously cut.”
