2 trends Janet Yellen calls 'disturbing'
There are two economic trends that Federal Reserve chair Janet Yellen told Congress this week she finds "very disturbing." Unfortunately, the Fed has very little power to fix either of them.
'Very
disturbing' trend #1: Long-term unemployment
About 3.5
million Americans have been out of a job for at least six months.
This
group accounts for 35% of all the unemployed.
"That's
a very disturbing trend, and something that we would like to be able to do
something about," Yellen said to the Senate Budget Committee Thursday.
'Very
disturbing' trend #2: Income inequality
"We have seen a trend toward
rising inequality in income and also in wealth. And I personally view this as a
very disturbing trend that policymakers should be looking at and considering
what is the appropriate response," she said. (present perfect,ds)
Why
the Fed can't fix either of these issues
Through
lowering interest rates and buying bonds, the Fed can try to stimulate the
economy by making it cheaper for businesses and consumers to take out loans.
Low interest rates can also boost the housing market by making mortgages
cheaper, and fuel stock market gains by making equities a more attractive
option than bonds with measly returns.
The Fed's
hope is that all this leads to job creation across a variety of industries. But
the Fed cannot target specific geographic regions or industries that need the
most help, or specific workers that may need to revamp their skills through job
training programs.
Monetary
policy also can't offer help to the low-income, lesser educated part of the
population, which suffers the most from long-term unemployment and inequality.
This group is the least likely to own stocks or be capable of buying a home, so
low interest rates don't help the poor as much as the middle class and wealthy.
As Yellen put it: "I think what
the Fed can do is to promote a stronger economy, a stronger job market,
generally, and that will help." (modals, ds)
So who
can solve these issues, and how? That job is up to President Obama and
Congress, who can do more for the economy through spending on various federal
programs. Yellen suggested education is the key, including more early education
for kids, job training for adults and access to student loans to those who
cannot afford college.
Aliko Dangote to invest $2.3bn in north Nigeria
Nigerian businessman Aliko Dangote has said that he will invest $2.3bn
(£1.35bn) in sugar and rice production in the north of the country.(simple future,ids)
Amid international concern about terrorism in the region -
highlighted by the kidnap of more than 200 school girls - he said that
creating jobs was key to ending the insurgency.Mr Dangote was speaking at the World Economic Forum, being held in Nigeria.
The Dangote Group has interests stretching from cement to food.
The businessman - who is Africa's richest man - also told the forum that his company would invest a total of $12bn in Nigeria, and $4bn outside the country, over the next four years.
China also promised further investment in Africa.
Chinese Premier Li Keqiang gave a speech in which he pledged "no strings" support for an African plan to develop a continent-wide high speed rail network.
He said China had set aside $2bn for an African Development Fund. (present perfect,ids)
But he promised that China would not interfere in African nations' internal affairs, a reference to the West, which often attaches human rights and democracy conditions to financial aid.
EU raises its growth forecast for 2014
The European Commission has
raised its
growth forecast for the EU, saying that "the recovery has taken
hold". (past perfect,ids)
The 28 nations of the
EU are forecast to grow by 1.6% for 2014, a touch higher than the forecast of
1.5% made in late February.
The growth forecast
for the 18-nation eurozone remains at 1.2% for 2014.
The Commission expects
the jobs market to continue to improve, forecasting EU unemployment will fall
to 10.1% this year. In March, the rate was 10.5%.
Unemployment in the
euro-area is expected to fall to 11.4%, from 11.8% in March.
Siim Kallas, the
Commission's vice-president, said: "The recovery has now taken hold.
Deficits have declined, investment is rebounding and, importantly, the
employment situation has started improving.
"Continued reform efforts by member states and the
EU itself are paying off."
(present
cont,ds)
Europe's biggest
economy, Germany, is expected to grow 1.8% this year.
But 2014 growth is
forecast to be much more modest for the euro-area's other big economies:
·
Italy: 0.6%
·
Spain: 1.1%
·
France: 1.0%
Inflation is expected
to remain low in 2014, at 0.8% for the euro-area. That is lower than its
previous forecast of 1.0% made in February.
There is concern that
Europe could slip into a period of deflation, which is dangerous, as it
discourages investment by firms and spending by consumers.
"While current
price developments reflect both external factors and the ongoing adjustment
process, a too prolonged period of low inflation could also entail risks,"
the Commission said.
"However, the gradually strengthening and
increasingly broad-based recovery should mitigate these risks," it added (modals, ds)
ECB holds fire but drops heavy hints
The European Central Bank dropped the heaviest of hints Thursday that it could cut interest rates or adopt more radical measures next month to stimulate the economy.
ECB
president Mario Draghi said the central bank was unhappy with eurozone price
trends but wanted to wait for updated forecasts in June.
"The [ECB] governing council is
comfortable with acting next time, but before, we want to see the staff
projections that come out in early June," Draghi told reporters (simple present,ds)after the central
bank shrugged off calls for immediate action to reduce the risks of very low
inflation.
The
International Monetary Fund and the Organisation for Economic Co-operation and
Development are worried that a prolonged period of very low inflation in Europe
could suppress demand and job creation, causing a slowdown in the the recovery.
Draghi
said last month that the bank stood ready to cut rates -- even into negative
territory -- or print money through a program of Fed-style asset
purchases if necessary.
The main
rate has been at a record low of 0.25% since November, the last time rates were
cut.
Inflation
fell to 0.5% in March, before recovering slightly to 0.7% in April. That is
still way below the ECB's medium term target of just below 2%.
Recent
data suggest that the eurozone recovery is gaining traction but there are still
several clouds on the horizon.
Unemployment
remains stuck just below its record level of 12%, sapping consumer demand. The
euro is trading near its recent peak above $1.39, making life harder for
European exporters and exerting more downward pressure on prices as imports
become cheaper.
Draghi said the strength of the euro
was causing "serious concern" given the low inflation across the
18-nation eurozone. (present
continous, ids)
The euro,
which rose on the ECB statement, plunged after Draghi's remarks.
"What we heard today strongly
reinforces our prior view that the ECB will ease policy at June's meeting, with
the new inflation projections a key trigger for action," noted Ken
Wattret, chief European economist at BNP Paribas. (simple future, ds)
To make
matters worse, there are early signs that the meltdown in Russia's economy is
starting to hurt some of Europe's big companies. Any escalation in the conflict in eastern Ukraine could hit business and household
confidence.
Draghi said the crisis contained
significant risks for Europe, and the region would feel the impact more than
other parts of the world if it escalates. (simple future, ids)
1. "We have seen a trend toward
rising inequality in income and also in wealth. And I personally view this as a
very disturbing trend that policymakers should be looking at and considering
what is the appropriate response," she said. (present
perfect,direct speech)
2. As Yellen put it: "I think what
the Fed can do is to promote a stronger economy, a stronger job market,
generally, and that will help." (modals, direct speech)
3.
Nigerian businessman Aliko Dangote has said that he will
invest $2.3bn (£1.35bn) in sugar and rice production in the north of the
country.(simple
future, indirect speech)
4.
He said China had set aside $2bn for an
African Development Fund.
(present perfect, indirect speech)
5. The European Commission has raised its growth forecast for the EU, saying that
"the recovery has taken hold". (past perfect, indirect
speech)
6. "Continued reform efforts by
member states and the EU itself are paying off." (present
continous , direct speech)
7. "However, the gradually
strengthening and increasingly broad-based recovery should mitigate these
risks," it added (modals, direct speech)
8. "The [ECB] governing council is
comfortable with acting next time, but before, we want to see the staff
projections that come out in early June," Draghi told reporters (simple
present, direct speech)
9. Draghi said the strength of the euro
was causing "serious concern" given the low inflation across the
18-nation eurozone. (present continous, indirect speech)
10. Draghi said the crisis contained
significant risks for Europe, and the region would feel the impact more than
other parts of the world if it escalates. (simple future, indirect
speech)
