In a speech today at the annual meeting of the Arkansas Bankers Association, James Bullard, president of the Federal Reserve Bank of St. Louis , said the U.S. jobless rate will probably not rise to levels reached during the recession of the early 1980s.
From Reuters: “I’m hopeful that we will stay under the peak hit in 1982, 10.8 percent,” he told reporters after speaking to the Arkansas Bankers Association.
Bullard said one of the Fed’s main goals in the coming year should be to avoid a deflationary trap like Japan experienced in the 1990s.
However, he said that in the medium term, it is very important for the U.S. central bank to have a plan in place to pull back the vast amounts of liquidity it has pumped into the economy to avoid a sharp rise in inflation when the economy rebounds.
“You’re sort of shooting the rapids here,” he said.
Bullard also alluded to the possibility of an economic expansion in the second half of 2009.
“We will see a less severe rate of decline in the second quarter and I’m hopeful we’ll see some positive growth in the second half of this year,” said Bullard, who is not a voter on the Fed’s policy-setting panel this year.
While the fact that we will see future increases in state unemployment is, as dictated by the current economic conditions – unavoidable, Bullard has a valid point arguing against state jobless rates reaching 1982’s levels. As much as we hear about the most cataclysmic economy since the Great Depression, the numbers seem to not reflect that assumption. For example: Michigan’s December ’08 jobless rate was (10.6%), compared to the record 16.9% in November 1982. The BLS table below shows historical high unemployment rate in each of the 50 states.