Spotlight Exclusives

Inside the Numbers: Fed Report Raises Concern that Recession Will Dramatically Increase Poverty

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Confirming what many have feared, the Fed announced yesterday that the “the economic downturn had intensified over all” and that recession may last for quite some time.

Describing a labor market that had “deteriorated more steeply than previously anticipated,” the Fed mentioned “substantial losses across a wide range of industry groups,” hiring plans that “dropped steeply,” and jobs that remained “in short supply.”

It predicted that “the unemployment rate was likely to rise significantly into 2010.”

Contained in the minutes of a mid-December meeting of the Federal Open Market Committee, a key arm of the Federal Reserve, are predictions sure to get people talking all across the country, from corporate boardrooms to kitchen tables.

Along with tightening credit and declining home values, the upcoming job losses mean the recession could worsen, despite unprecedented action by the Fed and Congress to stem the bleeding. 

The employment outlook confirms other bleak prognostications.  Back in November, Goldman Sachs predicted unemployment would rise as high as 9 percent in the fourth quarter, a number reinforced by the Committee۪s new evaluation.

These troubling assessments heighten the possibility that the ranks of our nation۪s poor could swell significantly without effective government response. 

Before Thanksgiving, Sharon Parrott sounded the alarm in a Center for Budget and Policy Priorities report that used the Goldman Sachs forecast to project that the number of poor Americans would rise by as much as 10.3 million.

That includes 3.3 million children. As many as 2 million children will be classified as in “deep” poverty, with family incomes below half the poverty line ($21,200 a year for a family of four).

The incoming administration has made some ambitious promises to reduce poverty in America.  In the short term, however, it appears that the problem may get worse before it gets better.

posted by Sam

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