The Irish Independent reports that the high rate of marginal taxation in Ireland has left the International Financial Services Centre (IFSC) at a competitive disadvantage, State Street's Irish boss Willie Slattery warned yesterday.
Speaking at a seminar on the future direction of Dublin's financial centre, Mr Slattery said that the additional 4pc in levies brought our marginal rate to 48pc and meant Dublin is no longer competitive when compared to other financial services centres.
Mr Slattery noted that despite the most turbulent period ever for financial services, IFSC-based jobs had proven extremely resilient; and while there have been some redundancies, the centre still employs some 25,000 people.
The head of the financial services firm's Irish arm said in some respect the IFSC had improved its competitiveness, but that the tax environment was a critical factor in attracting new jobs.
And he added that actual competitiveness has dramatically improved due to lower employee costs, the availability of skilled workers, and dramatically lower occupancy costs.
Mr Slattery said: "The key topical issue for all traded services sectors, not only financial services, is the competitiveness of our employee taxation environment. When much of the senior management in certain high value-added sectors in financial services are non-Irish born, and when 60pc of the employees of companies such as Google and Facebook are not Irish born, the attractiveness of our income tax environment is critical to our competitiveness as a location."
Organised by Dublin City Council, the seminar also heard an expert on global financial service centres, Professor Michael Mainelli, present the findings of a specially commissioned report into the IFSC.
Think-tank
Prof Mainelli, who is the founding director of commercial think-tank Z/Yen, concluded that Dublin should continue to nurture the insurance and re-insurance industries.
He also suggested it could develop as a centre with a speciality in long-term finance, involving products that take decades to mature. He also noted that since March this year, Dublin had slipped from 10th to 23rd place in a global ranking of centres compiled by Z/Yen. The brand image of Dublin has suffered more than other centres as a result of the financial crisis, he noted.
Dublin City manager John Tierney also took up this point. Mr Tierney said that the strengthening of "brand Dublin" is crucial to the success of the IFSC and the wider economy.
He said the city council, together with the leaders of business and the third-level education sector, is working on branding options that would enhance "brand Dublin" and, by extension, "brand Ireland".
The Irish Independent also reports that househunters in a busy commuter town can now get a two-bedroom apartment for just €110,000 -- a third of the original asking price.
It's a case of 'three for the price of one' at the exclusive Capella Court apartments in Newbridge, Co Kildare.
When the gated development first opened in 2007 -- buyers forked out prices starting at €322,000.
Attractive
But now they will be seething at the prospect that newcomers can buy three apartments for the money they handed over at the height of the boom.
Residents at Capella Court who bought in 2007 will be paying three times the amount in monthly mortgage repayments of their new neighbours for apartments of the same size and specifications.
The attractive price tag comes as receivers have been appointed to re-launch the apartments.
Dwellings are finished inside and lighting, footpaths and landscaping are in place. The two-bedroom apartments are set to attract investors, with average rents in the capital's commuter belt at €733, according to the latest property survey by popular website Daft.
David Browne of HT Meagher O'Reilly, who was appointed by Simon Coyle of Mazars accountants to handle the sale, said a number of units were sold at the initial launch in 2007.
Prices started at €322,000, but in April 2008 when the houses were re-launched, they dropped to €299,500.
Capella Court, which has 63 units in total, is laid out in three blocks, one of which is completely occupied. But of the remaining two towers, just four units are occupied.
Unoccupied
HT Meagher O'Reilly are releasing just 20 units in this phase, with a view to releasing the rest of the unoccupied units at a later date.
Units range in size from 65-80 sq m and come with balconies, fully fitted kitchen units, tiled floors and fitted wardrobes.
Capella Court was built by developer Hugh Heskin, who was also responsible for the upmarket conversion of the Estoria cinema in Galway into apartments; and the mixed-use Yew Tree scheme in Clane, Co Kildare, both of which sold successfully.
The Irish Times reports that the vast majority of staff at Ulster Bank have agreed to sign up to new contracts under which they will receive a lump sum worth 10 per cent of annual salary in return for accepting a cap on any future increases in their pensionable pay.
Some 4,264, or 82 per cent of 5,200 staff who were eligible for the new terms and conditions offered by the bank, agreed to the contracts by last Friday’s deadline.
Under the new contracts, pensionable pay will be capped at 2 per cent, meaning that even if staff receive larger pay increases, only a maximum of 2 per cent in any year would be used when calculating their pension.
Ulster Bank ended negotiations with the Irish Bank Officials’ Association (IBOA) over the proposed changes to the staff pay and pension scheme, choosing instead to engage directly with employees.
The bank said in a statement that it had “communicated directly with our employees regarding the final outcome of the offer of new terms and conditions”. A bank spokeswoman declined to comment further.
IBOA general secretary Larry Broderick said that the union would proceed with its legal action for almost one fifth of staff who have not accepted the changes.
The union claims that all staff are entitled to the 10 per cent lump sum payment under existing contracts and that the bank’s parent, Royal Bank of Scotland (RBS), which is 84 per cent owned by the UK government, has already made the payment to staff without any preconditions.
The IBOA has lodged legal papers with the Rights Commissioner in the Republic alleging Ulster Bank made illegal deductions from wages in pursuit of its claim. The union is taking a parallel legal action in Northern Ireland.
In addition to cutting back on benefits to staff in the bank’s final-salary pension scheme, Ulster Bank is planning to close the defined benefit pension scheme to new members. Employees on a defined benefit pension can remain in that scheme or join a defined contribution scheme.
The IBOA had argued that staff may benefit in the short term with the lump sum payment but they would lose out over time with the changes to the pension scheme.
The trustees of the pension scheme told employees this month that the bank intended to reduce the scheme’s future accrual rate for members from one sixtieth of final salary for every year in the scheme to one eightieth per year.
Bank chief executive Cormac McCarthy told managers in an internal circular that pension changes were “being made in the context of the operating environment we face and the long-term interests of our business”. The bank made an operating loss of £93 million (€104 million) in the first nine months of the year.
“The ongoing cost of supporting a defined benefit scheme for all existing employees in its present form is no longer sustainable,”he told managers.
The Irish Times also reports that Goodbody Stockbrokers is preparing to sell developer Liam Carroll’s 29 per cent shareholding in ferry group, Irish Continental Group (ICG), which is pledged against loans provided by the broker’s parent company, AIB.
It’s understood that Goodbody is poised to place the developer’s shares with institutional investors at a price of about €12 a share after receiving positive soundings from investors late last week as it considered orders for the shares.
The shareholding could be sold to investors over the coming days and possibly as early as today, as AIB tries to offload the shares to recoup the money lent to Mr Carroll to amass the stake in the ferry.
The bank provided loans of up to €175 million to Mr Carroll to build up his stake in the group.
AIB took control of the investment in ICG on the back of securities provided by Mr Carroll on the loans following his failure to secure court protection for his Zoe development group last month.
The shares were held by Mr Carroll’s firm South Morston Investment Company, which had provided a guarantee to Morston Investments, one of seven companies for which the developer twice failed to secure court protection.
A liquidator was appointed to Morston Investments on a petition by Dutch-owned ACC Bank.
Following the appointment, AIB installed accountant Billy O’Riordan of PricewaterhouseCoopers as receiver over South Morston Investment Company, effectively giving the bank control over the shareholding in the firm.
ICG shares remained unchanged at €13.40 yesterday after falling in early trading as small volumes changed hands.
The stock has climbed 38 per cent since mid-August when Mr Carroll was locked in a court battle for protection from creditors owed almost €1.3 billion for seven companies within the Zoe Group.
ICG has been the subject of two aborted takeovers over the past 30 months with former bidding rivals, the company’s chief executive Eamonn Rothwell and the Moonduster consortium, led by Philip Lynch, joining forces most recently to attempt a takeover.
They failed to meet a deadline set by the takeover panel last April and corporate activity around ICG has remained frozen since then.
Reports earlier this month suggested that ICG was considering buying up to half the shares owned by Mr Carroll. Such a move would require the approval of the board and shareholders of the group.
NCB Stockbrokers set a target of €17 a share for the company, which reported revenues of €197 million and earnings before interest, tax, depreciation and amortisation of €41.7 million for the nine months to September.
The Irish Examiner reports that a possible prescription charge would recoup just a fraction of an estimated €1.3 billion hike in the state’s drugs bill over the next decade due to dramatic increases in medication reliance.
Research predicts that up to 110 million items will be prescribed per year under the three community drugs schemes by 2021 - - compared to 60m items expected to be dispensed next year.
Health Minister Mary Harney has proposed charging medical card holders €0.50 for every item dispensed to combat over-prescribing. If introduced, it would generate €30m next year and up to €55m in 2021.
But research on the trends and growth in the Irish Community Drugs Scheme, compiled for the Government’s ESRI think-tank, revealed the prescription drugs bill is set to soar because of an ageing population, greater reliance on drugs and ingredient costs.
Yesterday, lead researcher Dr Kathleen Bennett, senior lecturer in bio-statistics at Trinity College, said projected trends suggest the amount of prescription items the Government is paying for could double by 2021.
The additional costs are being linked to higher ingredient prices, the use of more drugs which require complementary medication and the increase in the population over the age of 70.
The research suggests that by 2021 over-70s could require more than 45 million items a year through the medical card scheme.
It also revealed the cost of each item prescribed has already more than doubled in 10 years – from €11.20 in 1997 to €23.27 in 2007.
During the same period the average amount of items prescribed to each eligible patient trebled, to more than 30 per year.
The Trinity College pharmaceutical centre is also preparing research on the appropriateness of medication being prescribed to elderly people, and the length of time they remain on them.
Taoiseach Brian Cowen backed the proposal to introduce the prescription charge, saying the Government had to find ways of dealing with drug costs.
But pharmacists joined doctors and urged the Government to tackle the escalating drugs bill through a combination of measures, including treatment reviews and use of cheaper generic medicines.
Both the Irish Medical Organisation (IMO) and the Irish Pharmacy Union (IPU) expressed reservations.
The IMO described the proposal as "a fairly blunt instrument" and pointed to its own plan, which it believes could shave €300m off the bill.
It includes regularly reviewing patients to ensure they do not stay on expensive drugs for longer than necessary; establishing a system under which the state would only pay for drugs if they were going to be of clear benefit to a patient; tackling the relatively high cost of generic drugs in Ireland; and ensuring more generic rather than costly branded drugs are prescribed.
The Financial Times reports that the strength of the euro is hitting the profits and sales of companies in the eurozone sharply, in spite of the emerging economic recovery in the region.
Third-quarter results of some of the biggest companies in the currency bloc have revealed that they are suffering much steeper falls in profits than peers in European countries without the single currency, raising concerns that their competitiveness is under pressure.
Eurozone companies – excluding volatile financial and oil groups – have suffered a collective sales drop of 12.5 per cent and a fall in profits of 27 per cent in the third quarter, according to an ING analysis of the results of 311 groups.
European companies outside the eurozone in countries such as the UK and Switzerland have seen drops of 2.6 per cent in sales and 1.2 per cent in profits.
Similarly, Thomson Reuters says of the 36 companies in the Euro Stoxx 50 index that have reported third-quarter results so far, that non-eurozone companies have seen average profits and sales growth of 6 and 7.4 per cent, whereas those using the single currency reported only 1.8 and 1.4 per cent increases, respectively.
“The strong euro is exerting a lot of pressure and causing some competitive problems for European companies against American ones and the pressure will continue to mount,” said Gareth Williams, an equity strategist at ING.
Carlos Ghosn, chief executive of the French and Japanese carmakers Renault and Nissan, said: “We know already that we are unable to compete from our western European base compared with an eastern European base. The car industry now has western European production just for western Europe.”
One of the most graphic examples was provided by EADS, the aerospace group, which on Monday said currency movements had cost it €1.1bn in the first nine months of this year. Hans Peter Ring, finance director, said the “prolonged weakness of the dollar remained one of the biggest challenges to profitability”.
The plane maker is bracing for a tough 2010 as it struggles to offset this impact from the weak dollar as well as the global aircraft industry downturn and yet more losses on its troublesome superjumbo and military aircraft programmes
The euro was hovering around the $1.50 mark on Monday, up about 15 per cent since the start of the year.
The breakdown in the third-quarter results – which are about halfway finished in Europe – are significant because they highlight how the eurozone economy could be held back by a weak corporate sector.
“The export-based recovery is threatened,” Mr Williams said. Cyclical companies, such as chemicals and industrial goods. have done particularly poorly.
Globally, companies have struggled to deliver top-line growth in their sales at the same time as broadly surprising analysts and investors with better-than-expected profitability levels.
European companies have had weak sales growth, but US corporates have been affected as their earnings recovery has been based more on cost-cutting than a pick-up in demand.
Mr Williams said: “As you pass the peak of the margin-led phase, then companies will look to grow the top line and if the currency remains so strong then it won’t help them at all.”
The FT also reports that as Barack Obama undertakes his first official visit to China, the fate of the renminbi is again in the spotlight of the international currency market.
Ever since the People’s Bank of China changed the wording of a key currency policy statement last week, there has been speculation about whether and when the Chinese currency will be allowed to strengthen.
The wording change was significant because the Chinese authorities, which tightly manage the value of the renminbi, have kept the currency stable since the summer of last year. And the impact was immediate: in the past few days, forecasts for the appreciation of the renminbi against the dollar have risen to their highest level in a year, predicting a 3.4 per cent rise over the next 12 months.
The central bank’s third-quarter monetary policy report omitted a phrase promising to keep the renminbi “basically stable” and added it would consider other major currencies, not just the dollar, in guiding the exchange rate of the renminbi.
China allowed a near-20 per cent appreciation of the renminbi between July 2005 and June 2008, but re-pegged to the dollar last year to protect its exporters as the financial crisis intensified.
Many, including the US, believe the renminbi’s link to the falling dollar has left it acutely undervalued, giving China’s export sector an unfair trade advantage.
The PBoC report has therefore led to intense speculation about a shift in currency policy to coincide with the US president’s visit, ahead of which he pledged to raise the issue of exchange rates.
There have also been greater international calls for a stronger renminbi. The International Monetary Fund has been particularly vocal, but many other countries have joined the chorus, including some in Asia.
Dominique Strauss-Kahn, managing director of the IMF, said on Monday that exchange rate appreciation was part of the reforms that Beijing needed to implement to increase domestic consumption and move the country’s economy away from a reliance on exports.
“A stronger currency is part of the package of necessary reforms,” he said. “Allowing the renminbi and other Asian currencies to rise would help increase the purchasing power of households, raise the labour share of income, and provide the right incentives to reorientate investment.”
Chinese economic data has improved following the huge stimulus programmes implemented over the past year. Recent figures have shown the country is on course to exceed its 8 per cent growth target in the fourth quarter, but they also show money supply growth hitting record levels, implying a build-up of inflationary pressures.
“The question is when will the action taken to date impact the economy to such an extent that the focus of economic policy in China shifts from supporting economic growth to tempering building inflationary pressures,”says Derek Halpenny at Bank of Tokyo-Mitsubishi-UFJ.
He says Chinese money supply figures point to renewed inflationary pressures in 2010, which could lead the country to revert to the policy of gradual renminbi appreciation.
However, Mr Halpenny says such a policy might attract a new wave of capital into the country.
“One could argue that the policy of gradual appreciation actually encouraged speculative inflows that frustrated attempts to control domestic liquidity conditions,”he says.
One option would be a large, one-off revaluation of the renminbi, which potentially could douse speculation over further rises and hence depress speculative inflows.
But few analysts predict such a bold step.
They say a renminbi revaluation at this stage could derail the fragile recovery that is developing not only in China, but also in the US.
Although China is on target to achieve its 8 per cent growth target, the composition of that growth is less encouraging. More than half of China’s growth has been driven by the government’s fiscal stimulus rather than private demand. A rebound in exports has also made a significant contribution.
“With the transition from a supply to a demand-driven economy likely to take some time with ongoing government support, it seems unlikely that China will be willing to put the contribution from exports at risk from a higher exchange rate at this time,”says Hans Redeker at BNP Paribas.
Furthermore, he says, it currently makes little sense for the US to push for a higher renminbi given the potential negative impact on the US bond market resulting from any slowing in Chinese reserve accumulation.
China has built up foreign exchange reserves of $2,273bn. Much of this has been invested in US Treasuries, keeping a lid on US bond yields. Thus, any pause in Chinese reserve accumulation could lift yields and threaten any US economic recovery.
Bill O’Neill, Portfolio Strategist at Merrill Lynch Wealth Management, EMEA, says: “A turn in the dollar against the euro as a consequence of reduced Chinese reserve accumulation would have enormous repercussions for markets from commodities through to credit.
“We do not expect to see a move by China before year end, but merely the hint of a shift in currency policy could be enough to take some of the fuel out of the steamroller, forcing the dollar lower and cyclical assets higher.”
One thing on which observers seem to agree is that there is unlikely to be any revaluation during Mr Obama’s visit.
“We do not expect a major breakthrough,” says Michael Hart at Citigroup. “China is loath to give in to foreign pressure.”
The New York Times reports that President Obama and President Hu Jintao of China met in private off Tiananmen Square here on a frigid Tuesday morning to discuss issues like trade, climate change and the nuclear programs of Iran and North Korea, in a meeting that signaled the central role of China on the world stage.
The leaders told reporters afterward that the United States and China were in agreement on a range of issues, but they spoke only in general terms.
At a news conference where both presidents appeared, neither took questions from reporters, staying in line with the minutely stage-managed atmosphere of Mr. Obama’s first visit to China. They said in separate speeches that the two nations would work together to stabilize the teetering world economy, contain the dangers of climate change and prevent nuclear proliferation.
The public pronouncements were full of familiar rhetoric. At the start of their first meeting, Mr. Obama told Mr. Hu: “We believe strong dialogue is important not only for the U.S. and China, but for the rest of the world.”
The leaders greeted each other at the door of the Great Hall of the People after Mr. Obama’s motorcade slithered its way past thousands of onlookers crowding around Tiananmen Square, in front of the giant portrait of Mao, to catch a glimpse of the American president.
The leaders shook hands and walked up the red carpet, Chinese military leaders facing them. At the conference table where the first bilateral meeting was held, Mr. Obama sat flanked by senior cabinet members.
The meeting came the day after Mr. Obama tried to hold a frank and public discussion with Chinese students in Shanghai. The event was called a town hall, but Mr. Obama’s meeting with about 500 students had little in common with the sometimes raucous exchanges that have become a fixture of American politics.
It was, instead, an example of Chinese stagecraft. Most of those who attended the event at the Museum of Science and Technology turned out to be members of the Communist Youth League, an official organization that grooms obedient students for future leadership posts.
Some Chinese bloggers whom the White House had tried to invite were barred from attending. Even then, the Chinese government took no chances, declining to broadcast the event live to a national audience - - or even mention it on the main evening newscast of state-run China Central Television.
The scripted interaction underscored the obstacles Mr. Obama faces as he tries to manage the American relationship with an authoritarian China, whose wealth and clout have surged as its economy has weathered the global downturn far better than the United States’ or Europe’s.
It remained unclear whether the United States would make progress on several issues on this trip, including on the management of its tightly controlled currency, the renminbi, or on how to keep Iran from developing nuclear weapons. China has rejected American pressure to allow the renminbi to float freely and has opposed tougher sanctions on Iran.
The degree of control exercised over the most public event of Mr. Obama’s three-day stay in China suggests that Chinese leaders are less willing to make concessions to American demands for the arrangements of a presidential visit than they once were.
The White House spent weeks wrangling with the Chinese authorities over who would be allowed to attend the Shanghai town hall meeting, including how much access the media would have and whether it would be broadcast live throughout the country. In the end, Mr. Obama had little chance to promote a message to the broader Chinese public.
The event in some respects signaled a retreat from the reception given at least two earlier American presidents, Bill Clinton and George W. Bush, who both asked for, and were granted, the opportunity to address the Chinese people and answer their questions in a live national broadcast.
One local television station broadcast Mr. Obama’s session live. But the official Xinhua news agency offered only a transcript of the exchange on its Web site instead of the live Webcast it had promised. The White House streamed the event live on its Web site, which did not appear to be blocked inside China. But that site is not a common destination for most Chinese looking for breaking news.
Although it was carefully choreographed, the event gave Mr. Obama a little room to prod the Chinese authorities toward more openness. In his initial remarks at the forum, Mr. Obama said the United States was not seeking to impose its political system on other countries, but he called freedom of expression and worship among the “universal rights” common to all people.
He did, however, steer clear of the most delicate human rights topics, like the recent unrest in the Chinese regions of Tibet and Xinjiang, and he focused most of his comments on the need for China and the United States to become partners instead of rivals.
His tone reflected the fact that China had become the largest foreign lender to the United States at a time when America’s total public debt is surging and its economy is still trying to claw its way out of a deep slump. Mr. Obama said the two countries carried a “burden of leadership” on issues like climate change and nuclear nonproliferation, and said they needed to work more closely on matters of mutual concern.
“I will tell you, other countries around the world will be waiting for us,” Mr. Obama said at the town hall meeting. He later flew to Beijing for a dinner and full state visit hosted by Mr. Hu.
At the Shanghai forum, Mr. Obama was asked only one question - - “Should we be able to use Twitter freely?” - - that delved into an area the Chinese government considers controversial.
His cautious answer stood out as a sign that he hopes to reach China’s youth without offending its increasingly influential leaders. He delivered an oblique critique of China’s rigid controls and restrictions on the Internet and free speech without mentioning that China practices online censorship as a matter of policy.
“I have a lot of critics in the United States who can say all kinds of things about me,” he said. But, he added,“I actually think that that makes our democracy stronger, and it makes me a better leader because it forces me to hear opinions that I don’t want to hear.”
That snippet, at least initially, captured the attention of Chinese netizens. It was a topic of discussion on Web sites for a couple of hours after Mr. Obama spoke, before being deleted or removed from prominent positions. According to several Web snapshots in the hours after the meeting, “What’s Twitter?” and “Obama Shanghai” shot up to the list of top 10 Chinese Google searches.
“I will not forget this morning,”one Chinese Twitter user posted on the Internet, apparently using software to get around the government firewall. “I heard, on my shaky Internet connection, a question about our own freedom which only a foreign leader can discuss.”
But most of the questions appeared to reflect the careful vetting of the crowd by the Chinese. Beijing vetoed the White House’s attempt to invite a group of popular bloggers, an audience component that administration officials hoped would make the session more authentic, according to several people who were asked to participate in the forum.
“I was invited, but then a few days ago I was told we can’t go,” said Michael Anti, a popular blogger who formerly worked as a research assistant at The New York Times and was a Nieman fellow at Harvard last year. “I don’t know why.”
The NYT also reports that the chairman of the Federal Reserve, Ben S. Bernanke, warned on Monday that high unemployment and a continued reluctance by banks to make loans were likely to slow the economic recovery for the next year.
And in a departure from the usual practice of Fed chairmen, Mr. Bernanke tried to reassure global investors about the recent fall in the value of the dollar by saying that the central bank was “attentive to the implications of changes” and would “continue to monitor these developments closely.”
It is rare for Fed officials to comment on exchange rates, which for decades have been the responsibility of the Treasury Department. Mr. Bernanke’s message seemed to be that the Fed saw no cause for alarm in the dollar’s weakness and that it would not need to bolster the dollar by raising interest rates sooner than it would otherwise.
Taken together, the Fed chairman’s comments highlighted the conflicting goals that Fed officials may have to balance. To nurture the slow recovery and bolster employment, the central bank has vowed to keep interest rates low for “an extended period,” but to prevent a precipitous drop in the value of the dollar, which could stoke inflation, the Fed would have to raise interest rates.
In an otherwise gloomy speech to the Economic Club of New York, a group packed with financial executives, Mr. Bernanke played down fears that the recent jump in economic growth — to 3.5 percent in the third quarter after four quarters of contraction — would be likely to sputter out as stimulus measures wind down.
“My own view is that the recent pickup reflects more than purely temporary factors and that continued growth is likely,”he told the business group.
But he also made it clear that worries about high unemployment still trump concerns about future inflation. Unemployment, now 10.2 percent, is likely to remain “quite high” for the next year and will tamp down both growth and inflation.
Private forecasters have echoed the Fed’s somber outlook. Economists responding to the Philadelphia Fed’s quarterly survey, released on Monday, predicted that unemployment would average about 10 percent through the end of 2010 - - slightly more pessimistic than their outlook three months ago.
Mr. Bernanke warned that banks are still very reluctant to lend money, especially to small businesses that normally generate most of the nation’s new jobs.
“Small businesses have seen their bank credit lines reduced or eliminated, or they have been able to obtain credit only on significantly more restrictive terms,” Mr. Bernanke said. “The fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.”
“The best thing we can say about the labor market right now is that it may be getting worse more slowly,” he said.
One standard indicator of job trends - - new claims for unemployment benefits - - has still not fallen enough to signal a start toward net increases in monthly employment.
Mr. Bernanke said that unemployment has climbed twice as rapidly for men as for women, and that the jobless rates for young workers has soared even higher. For workers ages 16 to 24, unemployment is 19 percent. For young African-Americans, unemployment is 30 percent.
The Fed chairman said this recovery, like the previous two, was likely to seem like a recovery with no new job growth, in part because companies have become more reluctant to rebuild their work forces and have found new ways to increase the productivity of existing workers.
In a clear retort to more hawkish Fed policy makers who have worried that inflationary pressures might be nearer than they seem, Mr. Bernanke declared the high unemployment and unused factory capacity - - economic “slack,” in Fed jargon - - was still too high, meaning that the economy does not face inflationary pressures yet.
“Although resource slack cannot be measured precisely,”he said, “it certainly is high, and it is showing through to underlying wage and price trends. Inflation expectations, which are measured through surveys and through the premiums that investors pay for inflation-protected Treasury bonds, remain “stable,” he added.
Perhaps the biggest surprise of Mr. Bernanke’s speech was his comment about exchange rates - - a topic that the Federal Reserve normally avoids, because of an agreement dating back to 1951 that the Treasury had responsibility for managing the value of the dollar.
But amid growing anxiety in many parts of the world about the falling value of the dollar in recent months, Mr. Bernanke not only talked about the exchange rate but added that the Fed would monitor the dollar’s value closely.
At first glance, his comments suggested that he might be warning about the need to shore up the dollar by raising interest rates. But Mr. Bernanke described the dollar’s recent drop as a natural development that did not necessarily require Fed action.
Mr. Bernanke said the dollar initially climbed sharply when the financial crisis was at its most acute in late 2008 and early 2009, because investors had sought safety in Treasuries. But those “safe haven flows” have since abated, he said, and the dollar had “accordingly retraced its gains.”
“We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability,” Mr. Bernanke said. “The Federal Reserve will continue to monitor these developments closely.”
