Fed officials warn weak recovery won’t spur jobs

Unemployment likely will remain high for the next several years because the economic recovery won’t be strong enough to spur robust hiring, Federal Reserve officials warned today. The cautionary note struck by the presidents of regional Fed banks in San Francisco and Atlanta were the first public remarks of Fed officials since the government reported last week that the nation’s jobless rate bolted to 10.2% in October. It marked only the second time in the post-World War II period that the rate surpassed 10%. In separate speeches, Janet Yellen, president of the Federal Reserve Bank of San Francisco, and Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, warned that rising unemployment could crimp consumers, restraining the recovery. Lockhart says “very slow net job gains” may occur “sometime next year.” Troubles in the commercial real estate market and the plight of small businesses will also weigh on the recovery, they say. Small businesses—which held up reasonably well in the 2001 recession—have been clobbered by the downturn, accounting for about 45% of net job losses through the end of 2008, Lockhart says. During the last two economic recoveries, small businesses contributed about one-third of net job growth.