More Economic Good News From Federal Reserve Chairman (and More Caveats)
Newly reappointed Federal Reserve Chairman Ben Bernanke told the Brookings Institution in Washington that the “recession is very likely over.” Hardly waiting for applause, Bernanke went on to outline the many challenges still facing the economy, according to an Associated Press report.
The Fed Chairman also expressed confidence that Congress will pass more strict regulations for a financial industry that nearly drove the United States economy off a cliff, though that drive has been slow to materialize.
The biggest concern remaining for the Federal Reserve, and many Americans, is the country’s near 10 percent unemployment rate.
“That’s one reason why, even though from a technical perspective, the recession is very likely over at this point. As many people will still find their job security and employment status is not what they wish it was.”
Bernanke said that the pace of the recovery would be “moderate” in 2010, and that the unemployment rate would come down “quite slowly” due to “headwinds” stemming from ongoing credit problems and efforts by families to reduce household debt.
On Congress’ attention to financial regulation, Bernanke said:
“While maybe the focus on regulatory reform in the Congress has not yet been as intense as I expect it will be…I feel quite confident that a comprehensive reform will be forthcoming.”
While everyone agrees that Americans engaging in more responsible spending habits is not a bad thing, the fact that the recession has caused so many Americans to tighten their belts at once has produced a lingering effect on the economy and its recovery.
This financial quarter, analysts predict the U.S. economy will grow at an annual rate of 3 to 4 percent, versus shrinking 1 percent in the second quarter.
Bernanke’s remarks are the most optimistic comments he has made since the recession started. His words had even more impact as the government reported a 2.7 percent rise in retail spending in August, the largest such gain in three years.
All that good news has had an effect on Wall Street. The Dow Jones industrial average gained 57 points on Tuesday to close at 9,683.41. The Dow has not finished this high since last October 6th.
Not everyone shares Bernanke’s optimism, no surprise in a field like economics. Deutsche Bank analyst Karen Weaver predicted that national home prices will continue to slide until into next summer, hindering any recovery. And many people across the country are still filing bankruptcy in record numbers.
Bernanke’s comments came one year after Lehman Brothers filed for bankruptcy, a financial collapse that triggered a worldwide financial meltdown and took the entire U.S. economic system to the brink of ruin.
On that backdrop, Bernanke’s ability to share optimism just twelve months later bodes well for the country. As more progress toward recovery is made, the Federal Reserve hopes to get back into the good news business.