U.S. Economy Recovering at Moderate Pace, Likely to Pick Up

08 June 2011

Federal Reserve Chairman Ben Bernanke says economic recovery will not be fully established until the employment sector sees sustained improvement.

Federal Reserve Chairman Ben Bernanke says the U.S. economy is recovering at a moderate pace “from both the worst financial crisis and the most severe housing bust since the Great Depression.”

In remarks prepared for the International Monetary Conference on June 7 in Atlanta, Bernanke said U.S. economic growth in 2011 has been slower than expected, partially due to supply chain disruptions associated with the earthquake and tsunami in Japan. He said also that prices for many commodities have risen sharply during the past year, resulting in significantly higher consumer prices for food, gasoline and other energy products.

“That said, with the effects of the Japanese disaster on manufacturing output likely to dissipate in coming months and with some moderation in gasoline prices in prospect, growth seems likely to pick up somewhat in the second half of the year,” the central banker said.

Bernanke added that while the recovery appears to be continuing at a moderate pace, it is “both uneven across sectors and frustratingly slow for the millions of unemployed and underemployed U.S. workers.”

He said indicators suggest a loss of momentum in the labor market in recent weeks and that the Federal Reserve is monitoring developments closely. The group has noted signs of gradual improvement during the past several months that may lead to an increase in hiring during the second half of the year. The Bureau of Labor Statistics reported overall payroll employment was up by 54,000 in May, while the jobless rate of 9.1 percent remained essentially unchanged from the April figure.

Bernanke said the business sector is improving, with capital spending on equipment and software expanding, reflecting an improving sales outlook and the increasingly strong growth of demand in foreign markets.

However, he said, the construction industry and the housing sector remain troubled, and called on U.S. leaders to seek long-term solutions to the nation’s fiscal problems.

“Although it is moving in the right direction, the economy is still producing at levels well below its potential. Consequently, accommodative monetary policies are still needed,” Bernanke said.

He commended the Federal Reserve’s actions in recent years as having “doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation and promote economic recovery.”

The chairman said the group would continue to work to support the recovery through maintaining price stability, supporting measures to increase employment and ensuring inflation rates remain at levels consistent with the Federal Reserve’s mandate.

Treasury Secretary Timothy Geithner told the conference June 6 the United States is “in the midst of a fundamental reshaping” of its financial system, adding that recent reforms will help the country emerge from the crisis “not only transformed, but in much stronger shape.”