The Vital Link Between Banks and Jobs

The gradual easing of lending standards by U.S. banks may help lower the jobless rate. According to a report by Drew Matus, an economist at UBS, “easier lending standards are usually associated with faster employment growth.” Quantitative easing by the Federal Reserve has left U.S. banks with plenty of money to lend. According to UBS data, since the start of the third quarter they have started to relax lending standards—especially when compared to their approach during the depths of the recession, when the banks were not extending credit.

Easier credit feeds job creation. “What comes first?” asks Matus. “Is a company ready to hire but needs a loan to do so, or does a company see a chance to expand, gets the loan, and then thinks about hiring? It’s not clear, but jobs are jobs.”