RISMEDIA, February 25, 2010—(MCT)—Federal Reserve Chairman Ben Bernanke told Congress recently that he expected the U.S. economic recovery to continue at a moderate pace, but he expressed concerns about weakness in residential and commercial construction as well as the “quite weak” labor situation that has lifted chronic unemployment to very high levels.
“Of particular concern, because of its long-term implications for workers’ skills and wages, is the increasing incidence of long-term unemployment,” Bernanke said in prepared remarks as he delivered the Fed chairman’s semiannual report to the House Financial Services Committee. He noted that more than 40% of the unemployed workers have been jobless for six months or more, nearly double the share of a year ago.
Bernanke, in addressing Congress for the first time since his reappointment to a second four-year term as chairman last month, said the U.S. economy had expanded at an annual rate of about 4% in the second half of last year, with big help from temporary factors related to business inventory levels and stimulative fiscal and monetary policies. “A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.
With the early economic recovery and inflation remaining subdued, Bernanke reiterated that central bank policymakers expected to keep short-term interest rates at near zero for an “extended period,” which most analysts view as at least several months.
Bernanke also said again that the Fed had the tools to gradually siphon out of the economy the billions of dollars in emergency aid that the central bank pumped out to keep the economy from plunging into a depression. The so-called exit strategy is crucial, in both economic and political terms. If the Fed pulls back too fast, it could stifle recovery. If it moves too slowly, an outbreak of inflation could wreak havoc at home and damage confidence abroad.
Lawmakers questioning Bernanke were focused on jobs and the record federal deficits that are becoming a major political challenge for Bernanke and for the Obama administration. In statements before Bernanke’s testimony, Democratic members blamed the previous, Republican administration for the unemployment troubles and the bank bailouts that have fanned public ire at Bernanke and the political establishment.
Pressed by lawmakers, Bernanke said that the current pace of federal deficits was unsustainable and that the Obama administration’s economic stimulus plan—which Republican opponents have criticized as ineffective—had created jobs, though he didn’t cite any figures.
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