By: Mike Campbelll
Federal Reserve Chairman, Ben Bernanke, has warned that the USA will face some difficult choices as it moves to tackle its debt burden. Speaking before the congressional Joint Economic Committee, Bernanke remarked that: "Addressing the country's fiscal problems will require difficult choices, but postponing them will only make them more difficult.” He added that “significant restraints on the pace of the recovery remain, including weakness in both residential and non-residential construction and the poor fiscal condition of many states and local governments."
Although retail sales were up by 1.6% in March, Bernanke remains cautious about the US recovery. Retail sales have improved throughout Q1 and the rate of new job losses is slowing, but there is no sign of employers offering vacancies. 44% of the unemployed have been without work for more than 6 months. Long-term unemployment is believed to be a more intractable problem to cure since the unemployed themselves become disillusioned and their skills can become somewhat rusty. The long-term unemployed are likely to be amongst the last group of workers to become re-employed when the recovery finally kicks in with any real strength. The level of unemployment in the USA is hovering above the 10% mark. Some 8.5 million jobs have been lost in American as a result of the global recession.
The US debt burden dwarfs the Greek problem, but there is no serious concern that the world’s largest economy will default on its obligations and its ability to raise the funds required to service its debt is unquestioned. Fresh downwards pressure has been exerted on the Euro since it emerged that the Greeks want to discuss the details of the EU/IMF rescue plan, although the Greeks have repeated their intentions not to call on the facility.