The FINANCIAL — Former Federal Reserve Chairman Alan Greenspan predicted on October 4 that the U.S. economy will grow more than expected in the third quarter, but said the jobless rate also will continue to climb and pass 10 percent.
In an appearance on ABC's "This Week" with George Stephanopoulos, Greenspan said there are some signs the economy is starting to improve, according to Market Watch. But until companies create a substantial number of new jobs, the unemployment figure is likely to continue to rise in the near future, he said.
Greenspan said that he expected 3 percent growth in the third quarter, up from the 2.5 percent he previously predicted, CNN wrote. A slowing or halt in job losses is different from reversing the rise in unemployment, Greenspan noted, adding that the nation's unemployment rate — currently 9.8 percent — is "going to penetrate the 10 percent barrier before heading down." That prediction matches previous comments by President Obama and others, who say that unemployment is a lagging indicator in an economic recovery.
Obama said Saturday his administration would focus on job creation, and Greenspan said he supported that approach, according to the same source. Greenspan noted that only 40 percent of the $787 billion in Obama's first stimulus package has been spent, and he said it was helping to create momentum for the economic recovery.
The “silver lining” to the unemployment numbers is that firms have cut jobs expecting “the economy would go down far more sharply than it in fact did” after the “whole financial system imploded” following the September 2008 bankruptcy of Lehman Brothers Holdings Inc., Greenspan said, Bloomberg informs. U.S. firms “laid off a very substantial number of people to the point that the actual hours worked fell even more than the economy,” and this trend “can’t continue,” he said.
“At some point we’re going to start to see an improvement in employment,” Greenspan said, according to the same source. Still, to stop unemployment from rising the economy needs to add jobs at a rate of “more than 100,000 a month,” the former Fed chief said, adding he is “particularly concerned” about the number of people unemployed for six months or longer.
Greenspan said he would recommend that President Barack Obama focus on trying to get the economy going but without doing so much that the government's action are counterproductive, AP reported. With growth for the third quarter appearing to reach or surpass 3 percent, Greenspan said he would not propose a second stimulus package.
"In my judgment it's far better to wait and see how this momentum that has already begun to develop in the economy carries forward," he said, according to the same source. Greenspan against expressed his concern over the growing size of the federal deficit and the federal debt.
Sen. Evan Bayh, who's on the Senate Banking, Housing and Urban Affairs Committee, said he, too, is waiting for the remainder of the job-related stimulus initiatives to take effect.
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