September 18, 2012
According to a report released yesterday by two research advisors at the San Francisco Fed, one solution to the U.S. high unemployment rate might be to simply have a little more faith in our economy.
As manufacturers cut back on investments and consumer sentiment continues to fall
, the economists at the Federal Reserve Bank of San Francisco assert that "higher uncertainty is estimated to have lifted the U.S. unemployment rate by at least one percentage point since early 2008."
In past recessions, consumer sentiment has not had as direct an impact, since the Fed has always been able to lower interest rates to lure savers into spending, according to the report. Now, with interest rates hovering at zero, the Fed is running out of toys and consumers aren't happy with the ones they've got.
Despite signs of improvement, consumers (and thus corporations) have remained far more skeptical of an economic recovery. Even as the S&P 500 and the Dow Jones Industrial Average are up 21% and 18% in the last year, respectively, doubt remains as to whether these gains are here to stay.