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Long-Term Increase In Us Unemployment 'possible', Warns Oecd

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Millions of Americans risk falling out of the job market forever, the Organisation for Economic Co-operation and Development (OECD) has warned, as it cautioned a full recovery from recession will take years.

The recession has left the US with a long-term unemployment rate – a measure of those without work for more than six months – of 4.5pc, almost double that of the 1980s and 1990s downturns.

"Previous US recessions have exhibited no long-term damage to the economy or long-term increase in unemployment, but it is possible this recession will trigger these effects," the OECD said in its first survey of the world's biggest economy since late 2008.

The wide-ranging analysis urged the US to consider a Value Added Tax to help narrow its deficit, to radically reshape its housing policy and for the Federal Reserve to begin phasing out the stimulus measures that have cushioned the economy.

However, the most urgent priority, the report argued, is for President Barack Obama to marshal support across the political spectrum for measures including tax incentives for companies to hire new staff to help ease the growing crisis in the labour market.

However, the failure of the now slowing recovery to drive unemployment much below 10pc has split the parties in the run-up to the Congressional elections in November, making it far less likely Republicans will back any new measures to cut jobless numbers. Growing support for the Republican's Tea Party faction, which is sceptical of any new stimulus, also adds to difficulties faced by the Obama administration.

That political paralysis in Washington is putting more pressure on the Fed to cement the recovery, and its interest rate setting Open Market Committee gives its latest decision on Tuesday. The Fed is expected to resist investors' calls, at least for now, that a new policy blitz is needed.

The OECD acknowledged that rates should remain at the current 0pc to 0.25pc range, but insisted the economy must begin to be weaned off its life support.

"Since the movement of interest rates from extremely expansionary levels to neutral levels and the gradual shrinkage of the Fed's balance sheet will take some time, initial increases need to begin well before the economy once again approaches full capacity," the report said.

While much of the blame for the crisis has been laid at the door of reckless bankers, the OECD argued that fundamental reform of housing legislation is needed. Tax relief on mortgages must be abolished and the taxpayers' subsidy provided through government-backed mortgage lenders Fannie Mae and Freddie Mac must end. "These moves can lesson the likelihood and severity of future housing market shocks," the OECD said.

Separately, the National Bureau of Economic Research, the official arbiter of the length of business cycles in the US, said that the recession ended in June 2009, making it the longest since the Second World War.

If they kill the life support they kill the lies and the economy collapses, although in the long term the economy would reset. Instead we have a group of people determined to keep the ponzi system alive for as long as is possible creating the mother of all collapses when surely the inevitable end comes.

Although it appears that Halloween is fast approaching judging by the tone in this report.

At least the OECD recognize that the housing bubble has created a huge macro economic problem.

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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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