Federal Reserve Chairman Ben Bernanke, facing an economy and job market that are growing at a snail’s pace, on Wednesday (July 13) stuck to the view that temporary factors were behind the recent slowdown and that the recovery would pick up speed in the coming months.
The Los Angeles Times reported that in his semiannual report to Congress on the economy and monetary policy, the Fed chairman said that the “apparent stabilization in the prices of oil and other commodities should ease the pressure on household budgets.” He added that the economy should also get a lift this summer as car manufacturers increase production after cutting back because of disruptions from the earthquake and tsunami in Japan.
The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, “should bolster real household income, confidence, and spending in the medium run,” he said in prepared remarks to the House Financial Services Committee.
At the same time, Bernanke remained cautious about the prospects ahead, citing a number of headwinds, including still-high food and energy prices, the depressed housing market, limited credit for some consumers and small businesses, and the belt-tightening at all levels of government.
And the Fed chair said he expected no quick improvement in the stubbornly weak job market. The nation’s unemployment rate, at 8.8% in March, has risen in subsequent months, to 9.2% last month. And job creation, which had accelerated earlier this year, ground to a near halt in the last two months.
“The jobless rate will decline — albeit only slowly — toward its longer-term normal level,” he said, noting the most recent view of Fed officials that unemployment would likely remain near 9% at the end of this year and still in the 7% to 7.5% range at the end of 2013.
Bernanke’s statement was to be followed by an exchange with lawmakers, who were expected to focus on the nation’s struggles with the federal deficit and job growth. The Fed chairman has stated in the past that Congress needs to develop a budget that would narrow the deficit over the long haul but not make drastic, immediate cuts that could hurt the recovery.