US faces challenges in restoring economic growth: Ex Treasury Secretary
The US economy still has deep-seated weaknesses and is at risk of a damaging stagnation despite some improvements in economic activity, a former Treasury Secretary says.
The American economy continues to face serious challenges in restoring strong long-term growth, Lawrence Summers said in an interview with The Wall Street journal on Thursday at the World Economic Forum in Davos, Switzerland.
Summers, who is an economist and Harvard University professor, argued that the US risks experiencing a damaging “secular stagnation,” reflecting profound weakness that has slowed economic growth over the past decade.
He also said conditions in financial markets indicated that the US was still performing significantly below its potential.
The number of Americans filing new claims last week for unemployment benefits remained near a seven-month high, raising concerns that the momentum in the labor market could be easing early in the year.
"It is unclear at this point whether or not this move up in the trend reflects issues seasonally adjusting the data around the holidays or if it represents a more meaningful deterioration in the labor market," said Daniel Silver, an economist at JP Morgan in New York.
Moreover, wage growth for employed Americans has been stagnant, underscoring the job market’s struggle to gain sufficient momentum to maintain stronger economic growth.
Although businesses are creating jobs, many of them are part-time or temporary positions and the portion of Americans considered to be long-term unemployed remains unusually high.
The so-called labor force participation rate, the percentage of the working age population who either have a job or are looking for one, dropped to 62.7 percent in December, which is a 36-year low.
AHT/HRJ
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