Consumer Doubt Keeps Unemployment Up

Photograph by Aaron M. Sprecher/Bloomberg

A recruiter reviews a job seeker's resume during a Coast to Coast Career Fairs event in Houston.

Consumers’ uncertainty is weighing down the economy.

The Federal Reserve said today that the country’s unemployment rate would be lower — at around 7 percent instead of more than 8 percent — if consumers were less doubtful about economic issues.

“Uncertainty has pushed up the U.S. unemployment rate by between one and two percentage points since the start of the financial crisis in 2008,” wrote Sylvain Leduc and Zheng Liu, research advisers at the San Francisco Fed. “The private sector responds to rising uncertainty by cutting back spending, leading to a rise in unemployment and reductions in both output and inflation.”

As Aki Ito reported, consumer uncertainty might have been particularly influential in recent years because until 2008, policy makers had never run out of room to lower federal interest rates.

The report itself might fill readers with even more doubt: The Fed’s analysis shows that increased uncertainty leads to higher unemployment for at least three years.

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