President Barack Obama’s top economic adviser said on Monday that tackling high U.S. unemployment was vital but the problem would take time to fix.
“I think recessions like the one we’re suffering now have very substantial costs,” said Lawrence Summers, director of Obama’s National Economic Council.
“Addressing 10.2 percent unemployment is a matter of very great urgency. It is not something that is going to be fixed in a week, or a month, or a year,” Summers said in after-dinner remarks for a conference on innovation and the economy sponsored by Intel Corp and the Aspen Institute.
He also firmly rejected any notion there was any silver lining to the country’s worst slump in 70 years.
“One of the most damaging ideas in economics is … the doctrine of the cathartic recession. … Somehow it’s for the best if everyone suffers for a long time … (it) teaches everybody a very valuable lesson,” Summers said.
Labor market softness has persisted despite a return to growth in the third quarter, which ended the longest U.S. economic contraction since World War Two.
At 10.2 percent, it is the highest U.S. jobless level in 26 years and it may get worse before it starts to improve.
The White House has pointed out repeatedly that job creation traditionally lags an economic recovery, as firms squeeze more productivity out of existing workers before adding to their payrolls. As a result, it is eager to encourage firms to boost hiring and is hosting a jobs forum on Thursday to explore ways the process can be speeded up.
Summers said policies to foster science in schools, as well as research and development in the private sector, would be crucial to aiding long-term U.S. productivity growth.
The White House jobs forum will also focus on how to boost U.S. exports, and Summers reiterated the United States would no longer be the engine on which the rest of the world economy could fly.
“There is no way that our import-led growth is going to be the driving force for the entire rest of the world to have export-led growth going forward,” he said.
The United States would boost domestic savings and the rest of the world would have to pick up the slack, in particular China, whose domestic demand is just 35 percent of its gross domestic product, or half that of the United States.
“Thirty-five (percent) is a peacetime world record low and that is why their commitment to move toward more consumption, move toward more domestic demand-led growth, are, I think important for them and important as well for the global economy,” Summers said.