Volcker Says U.S. Unemployment Will Be ‘Too High for Too Long’

By Mike Dorning

May 4 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker said the U.S. economy faces a “long slog” as the nation struggles to reduce the jobless rate from close to a 26- year high.

“I am afraid the level of unemployment will be too high for too long,” Volcker said in the prepared text of a speech yesterday in St. Louis. “My characterization of the outlook is a long slog.”

Volcker, chairman of President Barack Obama’s Economic Recovery Advisory Board, said the U.S. economy should shift from reliance on consumer and government spending to a greater emphasis on investments and exports as it recovers.

Unemployment in the U.S. reached a 26-year high of 10.1 percent in October, and the rate was 9.7 percent in the first three months of this year. A Labor Department report scheduled to be released May 7 may show the jobless rate was unchanged in April, according to the median estimate in a Bloomberg News survey of economists.

“What we need is more saving, more industrial investment, and a stronger trade position,” Volcker said in his lecture at Washington University. “Our expansive and expensive program of entitlements simply must be brought under control. Our mortgage market must be rebuilt from the ground up.”

Volcker, 82, said the U.S. will require a “long period of economic adjustment.”

“Not much of that can be done this year, or even next,” Volcker said. “It is a challenge not just for this Congress and this administration, but for years ahead.”

A Labor Department report on May 7 will probably show the unemployment rate was 9.7 percent for a fourth straight month in April, according to the median estimate in a Bloomberg News survey of economists.

The jobless rate has not increased since October, when it reached a 26-year high of 10.1 percent. The economy lost 8.4 million jobs since the recession began in December 2007, the most of any downturn in the postwar era.