Neil Irwin and Ylan Q. Mui with the Washington Post are reporting that Ben Bernanke has a gloomy outlook on our country’s economic picture.
Ben Bernanke
The economy will continue growing into next year, Federal Reserve Chairman Ben S. Bernanke said Monday, but the expansion is likely to be weak and the job market slow to rebound.
Bernanke, offering his most detailed assessment of the economy in months, laid out a relatively gloomy prognosis for 2010. He said he believes that “continued growth next year is likely.” But, he added, “some important headwinds — in particular, constrained bank lending and a weak job market — likely will prevent the expansion from being as robust as we would hope.”
The comments, in a speech to the Economic Club of New York, suggest that Bernanke is in no hurry to end the Fed’s policy of near-zero interest rates. While he expressed confidence that the economy will continue expanding, and said that the Fed is mindful of recent declines in the value of the dollar, he repeatedly pointed to evidence that it will be underwhelming, especially as it concerns employment. “The best thing we can say about the labor market right now is that it may be getting worse more slowly,” he said.
Indeed, with jobs “likely to remain scarce for some time,” Americans are likely to be cautious in their spending, the Fed chairman said, and “the unemployment rate will decline only slowly if economic growth remains moderate, as I expect.”
The jobless rate rose to 10.2 percent in October, and is forecast to keep edging in the months ahead.
Between that weak prognosis for the job market — and a conclusion that “inflation seems likely to remain subdued for some time,” the speech suggested that the Fed will only remove its support for the economy when the outlook improves.
“We have a wide range of tools for removing monetary policy accommodation when the economic outlook requires us to do so, and we will calibrate the timing and pace of any future tightening to best foster maximum employment and price stability,” Bernanke said.
He also directly addressed recent declines in the value of the dollar, indicating that the Fed is paying careful attention to currency markets.
“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,” Bernanke said. He said that Fed policy will help ensure that the dollar is strong and a “source of global financial stability.” The comments suggest the central bank is somewhat wary of the rapid decline, and attached some of its own credibility to maintaining a stable value for the dollar.
Bernanke emphasized the human toll of the continued weak job market, noting the astronomical unemployment rates among some subsets of the labor force, such as the 19 percent jobless rate among people between ages 16 and 24. This widespread unemployment among young adults could have long-lasting implications, he said, as they lose out on work experience and on-the-job training.
Bernanke did give a nod to concerns about inflation in the future, noting that expectations of future inflation can “be early warnings of actual inflation,” and “must be monitored carefully.”
Also Friday, in a sign that the economic expansion is continuing this fall, the U.S. Commerce Department reported Monday that retail sales in October grew 1.4 percent compared to the previous month, driven by a jump in auto sales.
Car sales had spiked over the summer with the government’s popular “cash for clunkers” program that gave consumers a credit of up to $4,500 toward the purchase of a new, fuel-efficient vehicle. But sales slumped in September after the stimulus ended. Analysts said sales were returning to normal in October.
General merchandise and department stores also got a lift last month, rising .8 percent. Restaurants enjoyed a 1.2 percent rise, while health care stores were up .5 percent.
But several long-suffering categories of retail continued to experience sales declines. Electronics stores fell .6 percent, furniture retailers were down .8 percent, and building materials dropped 2.4 percent.
Still, the overall increase was higher than anticipated, which some analysts interpreted as a hopeful sign.
“Despite the consumer’s gloomy mood, spending is improving,” said Nigel Gault, chief U.S. economist for IHS Global Insight.
I believe Bernanke is being as honest as he can with the population but there are signs that this economy is going to continue to be a roller coaster on a downward trajectory for a while before this coaster starts to climb back toward the pinnacle from whence it fell. which it may not reach that pinnacle for years to come. Keep belts fastened
Related posts: