Stephen Foley: How housing policy could ease US unemployment
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 05 November 2011
Outlook: The Federal Reserve made no tweaks to monetary policy this week, but recent speeches by Federal Open Market Committee members suggest they are homing in on the US housing market as the one place they might still have leverage to boost the sluggish economic recovery.
Last month, the Fed restarted a programme of buying mortgage-backed bonds, in the hope of making mortgages easier to come by. The odds are that the Fed will accelerate this shift in its quantitative easing (QE) programme from buying Treasuries to buying mortgages.
Pushing down mortgage rates and easing the mortgage famine in this way will do more than just help to raise house prices, making consumers wealthier and more confident.
Revised monthly unemployment figures, out yesterday, showed that things were not as bad over the autumn as they had first seemed, but the private sector added a mere 104,000 jobs in October and the dismal road back to full employment still stretches into the horizon. The number of Americans who have been out of work for more than 6 months is close to six million.
Ben Bernanke, the Fed chairman, warned he has only a narrow window to act before this cyclical unemployment hardens into a structural problem – before all these laid-off workers give up job-hunting, lose their skills and become, in effect, unemployable. At that point, no amount of monetary policy innovation is going to get these people back to work.
The Fed is mandated to target full employment and it knows the moribund housing market is paralysing the labour market, too. The inability to move home is an impediment to the labour market flexibility that will be needed to crack structural unemployment. Despite the central bank's inaction this week, all roads lead to QE.
- 1 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 2 What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
- 3 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 4 'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
- 5 Madonna claims jokes about her age tantamount to racism: 'No one would dare to say a degrading remark about being black'
Husband and wife die holding hands within hours of each other after 67 years of marriage
Mohammed Emwazi: Nine things we know about Isis militant 'Jihadi John'
What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
'Jihadi John': Mohammed Emwazi – from British computer programmer to Isis executioner
Madonna claims jokes about her age tantamount to racism: 'No one would dare to say a degrading remark about being black'
Oscars 2015: Birdman beats Boyhood as Eddie Redmayne and Patricia Arquette win big - as it happened
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
This is what it's like to be dead, according to a guy who died for a bit
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...