Stephen Foley: Jobs woe that shines a light on lack of relief
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 04 August 2012
US Outlook No relief for the sluggish US economy this week, not from the Obama administration, not from Congress, not from the Federal Reserve.
The jobs numbers for July were better than expected, but the fact that the economy created 163,000 posts last month instead of the forecast 100,000 is a pretty small fillip in the context of 12.8 million unemployed. The unemployment rate, admittedly based on an imprecise survey of households, even ticked up from 8.2 per cent in June to 8.3 per cent.
The biggest disappointment of the past few days has been that the administration has failed to persuade the regulator of Fannie Mae and Freddie Mac, the taxpayer-owned mortgage giants, to bring relief to millions of Americans struggling with negative equity in their homes. This has emerged as a major problem. People whose homes are worth less than they owe cannot refinance to take advantage of record-low mortgage rates, and they can't sell up. That means Federal Reserve monetary policy is much less effective than in normal times, and reduces the flexibility of the labour market, entrenching unemployment.
The Federal Housing Finance Agency, which controls what Fannie and Freddie can do, has long opposed debt forgiveness for underwater borrowers on the grounds of moral hazard. It ignored the administration's entreaties, even after finding the plan might save taxpayers money by cutting defaults. And it did not even consider the wider economic benefits.
Meanwhile, Congress punted on a budget deal that might have given businesses some clarity on tax rates and government spending levels beyond the end of the year, instead choosing a politically expedient six-month fudget. And the Federal Reserve chose to keep its powder dry on new monetary stimulus in case of a deeper crisis later in the year.
Instead of providing comfort that they were not worse, these new jobs numbers ought to be a stark reminder to the do-nothings on all branches of government here: unemployment is unconscionably high in the world's largest economy.
International Women's Day 2014: The shocking statistics that show why it is still so important
Feminist quotes to inspire you on the International Women's Day
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
International Women's Day 2014: Mothers and daughters describe their hopes and dreams in touching photographs
Liam Neeson on death of wife Natasha Richardson: ‘When I hear the door opening, I still think I’m going to hear her’
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Orgasm machine to deliver climax at the push of a button
- 4 Too upsetting? Academy members voted for Oscar-winning 12 Years A Slave 'without watching it'
- 5 Liam Neeson turned down James Bond role to marry Natasha Richardson
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...