The still-recovering US economy is too fragile that an increase in the unemployment rate would send it spiraling back to a financial crisis. Economists are calling for the central bank and affected agencies to work on the unemployment rate now. Aside from the production of more jobs, economists also believe that imposing stricter regulations on the extension of bad credit loans services to the unemployed would help stop the economy from going down.
The voiced out sentiments of economists are not isolated. This is because the released minutes of the recently concluded meeting of the Federal Reserve show that majority of the attendees are concerned about the slowing down of the recovery of the US economy. This is despite the projects done over the years to hopefully pull the US economy out of recession.
For instance, last year the Federal Reserve launched a program called the Operation Twist. Under this program, securities are bought in an effort of bringing down the long terms interest rates. But with the slow progress experienced today, it would appear that such a move was not enough to pull the economy up.
Additional Actions Needed
A representative of the Federal Reserve said that it is time to take even stronger steps in order to raise the employment rate. This is where the stricter regulations on bad credit loans are in place.
If a person gets laid off but still has enough money to cover his or her living expenses, it would be easier for him or her to look for a job and recover financially. Almost everything today involves the checking of credit scores so it helps to make sure that bad credit loans will only help a person re-establish a credit score and not worsen it.
Fed chairman Ben Bernanke says that lenders should exercise more care when approving bad credit loans to make sure that the borrower really has the capacity to pay back. A shared internal database of borrowers has been suggested together with a proof of employment for at least three months. Financial help should also be available in case the borrower cannot make the payment.
“It is important to remember that the individual financial status affects the national economy too,” says Bernanke.
Policies must also be closely examined before implementation to make sure that they do not do more harm than good. For instance, putting in more funds to the education sector to produce more jobs will mean that another sector will not have enough funds to generate employment.
Some economists suggest that the government could lower taxes. Lowering taxes encourages more investments and therefore create more jobs. The problem is that lowering taxes would mean that the government can’t collect as much revenue to finance their offices and perhaps extend their services.
The stricter regulations and the decision on tax decrease must be decided and in place soon, given the unsteady progression of the economy. A lot of people are likely to lose their jobs because the strong jobs growth in the winter will collapse in the spring. So if you took a loan at that time, you would have to make sure you pay all your dues to save you financially if ever you lose your job by spring.
Last year, the non-farm payroll figures show a gain of 163,000 new jobs. Statistically, the figure is higher than what is expected but it is not enough to bring the unemployment rate down.
The issue on unemployment should not be delayed. Actions are required immediately so as not to worsen the problem. If politicians do not understand the urgency, then perhaps they would act faster if they are made aware that the state of the economy has a big impact on the people’s decision on the 2013 elections.